Square (SQ) has made a habit of defying Street forecasts. The fintech player’s shares have constantly surged ahead of analysts’ price targets, necessitating frequent model revisions in 2020. The juggernaut is showing no signs of fatigue yet, even after a year-to-date gain approaching 200%.
Following such a rally, then, is now the time to buy shares of Square? It is according to Tigress analyst Ivan Feinseth, who said “We believe further upside in the shares exists from current levels and continue to recommend purchase.”
The 5-star analyst has a simple explanation for the constant upward movement, rooted in the current secular and macro trends.
“SQ continues to benefit from the secular shift to electronic and application-based payments, which is also being accelerated by the COVID-19 pandemic,” he said.
Square’s resilience in the face of Covid-19 is even more impressive considering much of its revenue is derived from small businesses – those hurt the most during the pandemic – that use SQ’s electronic payment and business management tools. Despite fears the economic downturn’s effect on SMBs (small medium businesses) would blunt Square’s growth, the opposite has occurred.
“Businesses migrating online and only taking electronic payments due to the pandemic, along with over 30 million people now using SQ’s Cash App to send and receive money, continue to drive massive revenue growth,” Feinseth said.
Square reported “incredibly strong Q2 results,” increasing revenue by 64% year-over-year and much of the growth can be attributed to its peer-to-peer app Cash. The app’s gross profits surged by 167% compared to the same quarter last year, while Q2 revenue increased year-over-year by 140% to $325 million.
The company has also been given the go ahead to open its own bank and next year will launch Square Financial Services. Furthermore, it has also positioned itself as a leader on the digital money front. It recently announced the purchase of $50 million’s worth of Bitcoin and Feinseth believes “the increasing adoption of Cash App for Bitcoin will continue to be a growth opportunity.”
Overall, Feinseth rates Square shares a Buy, without suggesting a price target. (To watch Feinseth’s track record, click here)
Turning now to the rest of the Street, where Square has robust support among Feinseth’s colleagues. Based on 15 Buys, 6 Holds and 2 Sells, the stock has a Moderate Buy consensus rating. However, following the outsized share gains, the analysts think Square has surged enough for now. The $167.14 average price target implies the stock will be changing hands at a ~11% discount over the following months. (See Square 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.