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Square: An Innovator With Multiple Growth Drivers

Square’s (SQ) latest quarterly statement was a relatively disappointing affair with the results missing expectations. Considering the boom in business the banking disruptor experienced during the pandemic, could it be too difficult for Square to keep showing the sort of outsized growth investors have become accustomed to?

Not according to Tigress analyst Ivan Feinseth.

“Ongoing innovation and development of new products and services and the secular shift to electronic and application-based payments continue to be key growth drivers,” the 5-star analyst said. “SQ continues to invest in developing new payment solutions, launching expanded products and services, and strategic acquisitions to further expand its capabilities, which will continue to drive the accelerating growth of this industry-leading and innovative financial service platform.”

One such “strategic acquisition” involves the anticipated 1Q22 addition of BNPL (buy now pay later) company Afterpay. Square has splashed out $29 billion to bring the global leader in BNPL transactions under the fold, a move which will push Square further into consumer lending and expand the “integration” between the Seller and Cash App segments.

The recent launch of the Cash App for Kids which makes the peer-to-peer offering available to those aged 13 to 17 is another smart move, says Feinseth, which enlarges the addressable market with a potential 20 million additional users and “creates the opportunity for younger users to join the SQ ecosystem.”

Of course, Square’s crypto-related endeavors are well-known and also get a mention; the company’s plan to build an open developer platform which will allow for noncustodial, permissionless, and decentralized financial services with bitcoin as the primary focus is another growth driver.

But the company’s remit has also stretched beyond payments. The acquisition of Jay-Z’s music streaming service TIDAL for $300 million is another opportunity. In a similar vein to how Square got its start by helping small businesses “monetize their customer base,” Square can help artists “monetize their content.

There have been other recent acquisitions too. In July, Square purchased communications software developer Speramus, last year Credit Karma’s tax preparation business was acquired and so were Italy’s mobile digital payment platform Satispay SpA, and renewable energy development company Sky Solar Holdings, amongst others.

Accordingly, all the above serve to underpin Feinseth’s Buy rating and $310 price target. What’s in it for investors? Potential upside of ~47%. (To watch Feinseth’s track record, click here)

The Street’s average target is only slightly below the Tigress analyst’s objective; at $306.48, investors could be sitting on returns of ~45% over the next 12 months. Looking at the consensus breakdown, Square’s Moderate Buy rating is based on 17 Buys, 4 Holds and 1 lone Sell. (See SQ stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.