Shares of Square (SQ) are on the rise after Nomura Instinet analyst Dan Dolev raised his price target on the stock to $125, a Street-high according to Bloomberg. Dolev believes Square should be the newest member of the FANG complex of Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google (GOOGL; GOOG), as he believes it is “en route to disrupt the global payments ecosystem”.
SIMILAR TO FANG DISRUPTORS: In a research note this morning, Nomura Instinet’s Dolev raised his price target for Square to $125 from $86, while reiterating a Buy rating on the stock. The analyst pointed out that his analysis of Square’s fundamentals highlights buoyant GPV, revenue and marketing efficacy trends. Among the key positives are the rapid growth in GPV from large sellers, a “dramatic” acceleration in GPV growth derivatives, improving marketing efficacy, and Cash App downloads already exceeding PayPal’s (PYPL) Venmo by over 1M, he contended. Furthermore, Dolev argued that similar to FANG stocks that have disrupted traditional markets with massive global TAMs, Square’s fully cohesive solutions and rapid rate of innovation suggest that it is “en route to disrupt the global payments ecosystem.” The analyst noted that he does not believe Square is too expensive, given its “stellar” 45% expected three-year revenue CAGR, which makes it screen more attractively than many payment peers and FANG stocks.
PEERS ALSO RAISE TARGET: Meanwhile, Jefferies analyst JohnHechlt also raised his price target for Square to $88 from $63 this morning after taking a detailed look at the company’s non-payments businesses. The analyst, however, kept a Hold rating on the shares. Various sum-of-the-parts analyses point to current premium valuations for each segment, suggesting “strong growth and successful execution is likely priced-in”, Hecht contended. While Square’s Subscription & Services products are “no doubt well positioned”, the stock’s valuation remains full, he added. Last week, two other Wall Street analysts had increased their price targets on Square. Citing the findings of her analysis of Square Cash App monetization, Evercore ISI analyst Rayna Kumar raised her price target on the stock to $101 from $76 and reiterated an Outperform rating on the shares. Kumar believes the company’s new product features over the last two years will likely become a “material driver to both revenue and earnings over time”. The analyst expects the app to contribute up to 16c to Square’s FY20 EPS, 30c to FY21 EPS, and 40c in FY22 EPS, stating that the company’s monetization strategy is in the “early innings.” Also bullish on the company’s momentum, Stifel analyst Scott Devitt raised his price target for Square to $100 from $76. The analyst said he expects continued momentum from larger sellers as Square’s retail ecosystem keeps evolving and sees the company’s partnership efforts expanding its reach and potential for cross- and up-selling. Devitt reiterated a Buy rating on the shares.
