Pacific Crest Upgrades Square (SQ) to Overweight
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Pacific Crest upgraded Square (NYSE: SQ) from Sector Weight to Overweight with a price target of $15. Analyst Josh Beck said payments and opex efficiency are enough to propel fundamental upside, and he thinks "other bets" offers long-term optionality.
"Our in-depth work on payments, delivery and lending leads us to believe that Square is set up for a consistent series of positive fundamental surprises over the next year. Payments and opex upside may shift focus to incremental profitability and cash flow, leading to a positive rerating of the stock," said Beck.
"We have long been positive on the payment processing business and our cohort analysis reinforces our bullish stance on digital payments penetration and positive survivorship benefits. Our checks on lending and regulation have been positive, which raises our conviction in the mid-term opportunity for Square Capital. A Caviar deep dive left us cautious, but we view it as less of a drag, and if an exit materializes, EBITDA could benefit. 'Other bets,' including international (e.g., potential U.K. expansion), partnerships (e.g., Vend), and software (e.g., instant deposit) remain nascent, but could evolve into meaningful opportunities," added the analyst.
Shares of Square closed at $11.88 yesterday.
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