BTIG Flips To Buy On Square; Stock Up 194% YTD

BTIG upgraded Square stock to Buy from Hold and maintained a price target of $220 (19.5% upside potential), given the mobile payment processor’s strong user growth in Cash App and the recovery in the Seller business during 3Q.

BTIG analyst Mark Palmer said that “While the acceleration of the user growth of SQ’s Cash App during the pandemic has been nothing short of remarkable, our concern about the impact of the virus on the small- and medium-sized businesses served by its Seller segment had given us pause.” Palmer added that during 3Q, “the recovery of its Seller segment has occurred faster than we had expected, while Cash App’s growth in customers, transactions and gross profit defied predictions of a slowdown in the absence of a new round of government stimulus payments.”

During the 3Q, Square’s (SQ) mobile payment service Cash App revenue, excluding bitcoin, surged 174% year-over-year to $435 million, due to increased customer engagement. Cash App gross profit also jumped 212% during the reported quarter on a year-over-year basis. Square said that in 3Q, “the number of average daily transacting active Cash App customers nearly doubled from the same period last year.”

The strong momentum in Square’s Cash App business also helped drive 3Q revenue growth of 140% to $3.03 billion year-over-year, which topped analysts’ estimates of $2.05 billion. The company’s 3Q earnings of $0.34 per share grew 36% year-over-year and beat Street estimates of $0.16. (See SQ stock analysis on TipRanks)

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 18 Buys, 6 Holds and 3 Sells. The average price target of $188.50 implies upside potential of about 2.40% to current levels. Shares are up about 194% year-to-date.

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