Square Launches On-Demand Pay Tools; Shares Pop 7%

Square has introduced two new features, On-Demand Pay for employees, and Instant Payments for employers, to enhance flexibility to effectively manage money and simplify payroll. Shares of the mobile payment company closed 7% higher on Tuesday.

Caroline Hollis, Square Payroll general manager said “Because businesses still run payroll on a fixed schedule, employees are paid days or weeks after they’ve worked. We created On-Demand Pay for employees so they can access their earnings when they need them, as soon as their shift has ended. For employers, it can take up to four days for payroll funds to move from their bank account to their team. With Instant Payments, employers can now fund their payroll instantly, getting money to their team faster.”

The coronavirus pandemic has boosted demand for Square’s (SQ) digital financial services and software-based business solutions. Meanwhile, cash payment transactions by US Square sellers declined from 37% in February to 33% in April, and remained stable at 33% through the end of August. Square said that the share of cash transactions was 33.3% as of Aug. 1, down from 40.6% during the same period a year ago. (See SQ stock analysis on TipRanks).

On Sept. 15, Mizuho Securities analyst Dan Dolev maintained a Buy rating and a price target of $225 (45.6% upside potential). Dolev said “SQ is currently testing a short-term borrowing feature for its Cash App users. Our proprietary evidence-based analysis shows Cash App lending could potentially result in +10% additional gross profit opportunity for the Cash App ecosystem.”

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 14 Buys, 12 Holds and 2 Sells. Given the year-to-date share price rally of about 147%, the average price target of $152.23 implies downside potential of about 1.5% to current levels.