Square Inc (SQ) Is Making Moves Up-Market, Cheers This Analyst

Jefferies' El Assal is bullish on Square's opportunity in the market after an encouraging discussion with CFO Sarah Friar points to gains ahead.


On the heels of meeting with Square Inc (NYSE:SQ) CFO Sarah Friar, Jefferies analyst Ramsey El Assal  sizes up soaring merchant demand for the tech firm’s solutions as Square moves on up in the market.

This is a company pivoting its business on keeping investments balanced with a guide that angles for a boost in margin expansion for 2018, and Assal will not be surprised to see Square come close to positive GAAP earnings this time next year. Meanwhile, with all the bitcoin buzz dominating tech chatter amid the investor grapevine, the analyst finds himself blown away by Square’s just-revealed enhanced Bitcoin/Square Cash beta candidate demo.

All the while, Square’s product innovation and evolution continues to show that thanks to co-founder (and chief executive of Twitter) Jack Dorsey’s guiding hand, the mobile payments company is making itself a market player with forward momentum.

Assal notes, “Our meeting included a demo of the new Square Retail module that contains differentiated capabilities like a customer data directory and more in-depth inventory management tools, both bundled directly into the POS (Square Retail costs merchants $60/month). We believe merchant demand is high for SQ’s seamlessly integrated suite of solutions and believe the launch of this product along with the continued growth of ancillary subscription and service revenue is important in stabilizing take rate as the company moves up-market, much like we saw in the most recent quarter.”

Glancing ahead, Assal is enticed by international adoption prospects, concluding: “We believe 40%-50% of total applicable payment volume in both Canada and Australia flows over domestic schemes such that SQ should get a nice demand bump when domestic schemes are included in the value proposition.”

Therefore, the analyst maintains a Buy rating on SQ stock with a $47 price target, which implies an almost 20% upside from where the stock is currently trading. (To watch El Assal’s track record, click here)

TipRanks shows a cautiously optimistic Wall Street Sentiment circling the mobile payments company, with 11 bullish on Square stock in the last 3 months, 11 on the sidelines, and one bear left running. With a loss potential of close to 2%, the stock’s consensus target price stands at $38.15.

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