Square (SQ) a Top Pick at Mizuho But Also a Takeover Candidate
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Mizuho Securities analyst Neil Doshi reiterated a Buy rating and $16 price target on Square (NYSE: SQ), calling it one of our favorite stocks in the SMID Cap sector given strong execution, a solid management team, deep moats around its 2 million SMB customers, and promising potential for high-margin revenue from software and services. The firm also views it as a takeover candidate.
On takeover potential, Doshi commented, "Square is also highly likely to be acquired, in our view. Given the company’s strong growth (though off of a small base), scale with over two million SMB merchants, and solid take rates and transaction margins, we believe that Square would make an attractive target for several fin-tech companies, like PayPal (NASDAQ: PYPL), Alibaba (NYSE: BABA), American Express (NYSE: AXP), Chase (NYSE: JPM) and other firms. We could see a scenario where Square could also be a target for Google (NASDAQ: GOOGL) as it builds out its payment platform and can marry payments with Google Enterprise solutions. However, valuation is rich, and the company does not have a proven track record of historic profitability."
Shares of Square closed at $11.23 yesterday.
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