BTIG Starts Square (SQ) at Buy; Sees Evolving from Payments Company to Commerce Company

BTIG starts coverage on Square (NYSE: SQ) with a Buy rating and $15 price target.

Analyst Mark Palmer noted the following with today's initiation:

• At the same time, SQ is evolving from a payments company to a commerce company, aggressively building products around the extremely valuable data it collects during the payment process. We believe the growth trajectory of both the payments and non-payments businesses combined with managements targeted adjusted EB)TDA margins of 35%-40%, is supportive of the multiple we have assigned.
• Even though SQ has carved out a leading position as a facilitator of electronic payments for small brick-and-mortar businesses, it has reached only about 15% of its potential customers in the U.S., and it has just begun to execute its plans for international expansion.
• We believe SQs growth will continue to be rooted in its flagship mobile payments service, but a key to increased profitability will be the array of value-added functionality for small businesses that it began to build out in earnest during 2014. This ranges from merchant cash advances (MCAs) that provide working capital to firms that face difficulty accessing it from traditional banks to data-driven services that help small businesses to improve operating performance.
• Moreover, we believe that as technology giants such as Apple, Samsung and Google continue to build out their payments capabilities, their efforts to gain market share will drive consolidation. SQ is a legitimate acquisition candidate such that a takeout at a healthy premium is a real possibility, in our view.

For an analyst ratings summary and ratings history on click here. For more ratings news on click here.

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