After talks in NYC with Stacey Finerman and Nikhil Dixit from Square’s (SQ) Investor Relations team, Nomura’s analyst Dan Dolev says he’s excited about the electric payment company’s growth and progression, but is revising his price target — down. Let’s take a closer look.
Square has been an innovation superpower and some of the offerings look like breakout apps, such as the Cash App. Indeed, Cash App’s big success helped the company increase its 2018 revenue guidance by $207 million since 4Q17.
Dolev noted, “With about 39.9 million cumulative downloads since inception (per our estimate) and rapid growth, it is not surprising that the Cash App topic took center stage at the meetings. In fact, similar to [former] CFO Friar’s recent comments that “the app has become the de facto of finance app.”
The analyst notes that when comparing download data of SQ’s Cash App with PYPL’s Venmo, you can easily see the success of the app. Dolev says while the company hasn’t provided an update on active users, (7 million was the last number on record) the download frequency appears to be a good proxy for active users. In addition, Cash App customers spent $250 million with Cash Card, which is triple the amount spent in December of 2017.
But not everything is peachy in Square’s orchard: “Overall, we remain utterly bullish about SQ’s ability to sustain ~45% revenue CAGR through 2021. However, given management’s focus on reinvesting in the business to capitalize on the vast software, services, and international TAM, coupled with multiple compression in fintech overall, we are lowering our adj. EBTIDA expectations,” the analyst concluded.
Overall, Dolev reiterates a Buy rating on SQ stock, while lowering the price target to $107 (from $125), which still implies about 73% upside potential from current levels. (To watch Dolev’s track record, click here)
The final word hovering around this payment is a bullish one, as TipRanks analytics exhibit SQ as a Buy. Out of 30 analysts polled in the last 3 months, 16 are bullish on SQ stock while 12 remain sidelined, and only 2 are bearish. The 12-month average price target stands at $89.37, marking a 943% upside from where the stock is currently trading. (See SQ’s price targets and analyst ratings on TipRanks)