Square’s (SQ) Cash App has started out as just another option to send friends money, like PayPal’s Venmo. But as it added more features, it broadened its appeal, and eventually, surpassed Venmo in terms of downloads. Cumulative Cash App downloads totaled 43.3 million as of the end of January, compared with 41.2 million for Venmo, according to Nomura’s payments app tracker. Interestingly, the spread between the two reached an all-time-high of 4.2 million.
Square built that momentum by adding services to Cash App that have clear monetization capabilities. Meanwhile, PayPal has struggled to balance monetization with maintaining its user experience and, by extension, its user base.
Nomura’s Dan Dolev noted, “We estimate that the Cash App could contribute $100mn or 3% of adj. revenue by 2020, growing at a roughly 60% CAGR vs. an est. $40mn in 2018. We base our estimates on prior company disclosures and our own Cash App tracker. Specifically, we continue to expect downloads to increase by 20mn in 2019 and 15mn in 2020, of which 35% are active. We expect the current revenue of $3 per user to continue to expand over time (est. 15% per year) as the Cash App continues to add more products and services that help SQ further monetize the App (e.g. consumer rewards like Boost). We remind investors that the Cash Card is the fourth-largest component within subscription and services-based revenue following Instant Deposits, Caviar, and SQ Capital, and the second-fastest grower following Instant Deposits.”
Dolev, whose $110 price target makes him the biggest bull on Square stock, reiterates a Buy rating on the stock. (To watch Dolev’s track record, click here)
How does Dolev’s bullish forecast echo against the word of the Street? Quite positively, it seems, as TipRanks analytics exhibit SQ as a Buy. Based on 14 analysts polled in the last 3 months, 9 rate Buy on Square stock while 3 maintain Hold and 2 recommend Sell. The 12-month average price target stands at $78.13, marking a nearly 6% upside from where the stock is currently trading. (See SQ’s price targets and analyst ratings on TipRanks)