BTIG Sees Potential AmEx Threat to Square's (SQ) Small Business Loans Ops as 'Overblown'

BTIG affirms Square (NYSE: SQ) with a Buy rating and $12 price target amid market chatter of a business threat from AmEx’s (NYSE: AXP) planned small business lending unit.
Unit with respect to Square Capital.

Analyst Mark Palmer offered the following points on Thursday:

• We believe such statements are really vast overstatements, as the details that have emerged about AXP's new products, offered under the heading of Working Capital Terms, paint a picture of a short-term vendor financing vehicle that differs in significant ways from the flexible loans offered by Square Capital. As such, we believe the "threat" posed by AXP to SQ's lending business has been overblown.
• SQ management pointed out to us that Square Capital's loans and AXP's vendor financing represent "completely different products," and we believe a closer look at what is known about Working Capital Terms bears that out.
• AXP intends to offer 30- and 60-day loans to existing small-business cardholders that may range from $1,000 to $750,000 for use in paying vendors. In contrast, SQ in March ceased offering merchant cash advances (MCAs) and began offering flexible loans with terms as long as 18 months. While some Square Capital loans are used for vendor financing, many are used to fund growth initiatives that likely would not be possible otherwise due to a lack of available funding.

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