With Square (SQ) stock trading about 30% off its 52-week high, is it a good time to buy? That’s the question many investors are asking themselves right now.
While Square’s first-quarter results beat analysts’ expectations, the company provided a disappointing outlook for the second quarter. With that in mind, should investors be worried about the future of Square’s growth story? Well, given the company’s position in the payments processors market, its growing platform of services and increased e-commerce penetration, many argue this is more than enough reason to buy Square for the long-term.
Evercore analyst Rayna Kumar believes this is true, as she reiterates her Outperform rating on SQ stock, along with an $101 price target. (To watch Kumar’s track record, click here)
Kumar met with members of Square’s management team on Tuesday, which reinforced conviction in her Outperform rating. The analyst believes Square’s new products, such as Terminal, Register, Retail POS, Cash App will drive 40%+ adjusted revenue growth in 2019 by continuing to increase Square’s TAM to larger merchants and to underbanked consumers. Over the next five years, Kumar estimates 31% annual revenue growth and 55% EPS gains, on average.
Kumar says, “Square Cash should be a large driver of long-term growth algorithm with a focus on pushing consumers to utilize Square Cash in place of a bank account.” Cash is similar to Chase Pay or Venmo, where users send money, but also allows for customers to use Card to “make purchases and receive instant rewards through the Boost Program.” Square generates revenue by collecting fees for each transaction on Card.
The company continues to build out products for larger merchants, including Square Register, Terminal and Online Store. This remains an incredibly important revenue-generator, as more than 50% of Square’s total gross payment volume now comes from large sellers, or merchants with annual volume greater than $500K.
The company has made it a priority to expand its services platform, which has contributed to more engagement by large merchants. Square is trying to become a one-stop shop for all -things finances for these clients. By expanding their product line, the company is able to attract repeat customers, while retaining them for future launched, too.
Overall, Wall Street has mixed feelings on Square stocks. TipRanks analysis of 22 analyst ratings shows a consensus Moderate Buy. Of the 22 analysts, 13 rate Buy and nine say Hold. The average price target among these analysts stand at $85.42, which implies nearly 20% upside from current levels. (See SQ’s price targets and analyst ratings on TipRanks)