Square Analysts Are Torn on Its Value Heading Into Earnings
Square Analysts Are Torn on Its Value Heading Into Earnings
(Bloomberg) -- Square Inc. analysts are divided on the stock’s value as its earnings release date approaches. The fintech company received both an upgraded buy-equivalent rating from Susquehanna Financial Group and an initial sell-equivalent rating from Nomura Instinet on Friday.
Square shares are down about 9% from this time last year. Susquehanna analyst James Friedman pointed in a research note to several reasons for the under-performance, including decelerating margin expansion and a slowdown in gross payment volume growth.
However, Friedman says Square’s increased reinvestment of margins back into seller customer acquisition costs will likely boost GPV and revenue growth in 2020 and 2021 and he expects the stock to follow this trend. His target price for the stock is $77.
With a more pessimistic view, Nomura analyst Bill Carcache wrote in a research note that while he loves the innovation that Square brought to the payments business, shares are overvalued as some investors view it as a software play and not in line with its payments industry peers.
Decreasing gross payment value growth is a result of increased competition as Square attempts to serve larger merchants, Carcache wrote. He also said the efficiency of Square’s investment spending appears to be declining as revenue growth slows, arguing it is difficult to see how Square’s investment cycle will produce a margin improvement after it sold its food delivery service Caviar in August. His price target for the stock is $49.
Square rose 0.8% to $62.55 at 11:51 a.m. in New York.
The company has 18 buy ratings, 18 hold ratings, five sell ratings, and an average price target of $73 according to Bloomberg data. The company is set to release its earnings statement on Nov. 6 after the market close.
To contact the reporter on this story: Jarrell Dillard in New York at jdillard11@bloomberg.net
To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Jim Silver
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