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Square wins a bull as pandemic pushes digital shift

Sep. 24, 2020 9:27 AM ETBlock, Inc. (SQ) StockSQBy: Liz Kiesche, SA News Editor26 Comments
  • Oppenheimer analyst Jed Kelly upgrades Square (NYSE:SQ) to Outperform from Perform as the pandemic triggers a massive shift in digital commerce that pushes merchants to adopt omnichannel solutions.
  • "We see SQ’s two-sided networks of sellers and consumers positioning the platform as a structural winner during the recovery to sustain elevated growth levels for multiple years," Kelly writes.
  • That contrasts with many analysts who expected Square's business to suffer as many of its merchant clients are small businesses that had to close or curtail business early in the COVID-19 pandemic.
  • Indeed, according to Yelp, 164K businesses have closed since the pandemic, up 23% from July.
  • Kelly sees near-term revenue challenges for Square, but believes its "best-of-breed  competencies in onboarding small merchants in a risk-efficient manner, while providing a cohesive user experience with multiple commerce channels, positions it for outsized share gains as economic activity normalizes."
  • On the consumer side, Square's Cash App is attracting users then generating monetization through banking services; Oppy forecasts segment gross profit at 54% 2020-'22 CAGR.
  • Price target set at $185; analysts' average price target is $149.82.
  • Still, Square slips 0.6% in premarket trading.
  • Kelly's take on SQ contrasts with Quant rating of Neutral and SA Author's average rating of Neutral (1 Very Bullish, 6 Bullish, 1 Neutral, 3 Bearish, 2 Very Bearish).
  • For a Bearish view on Square, read SA contributor Eric Weiss's Square: Retail Hype Leads to Misplaced Overvaluation.
  • See SQ's total return vs. peers PYPL and SHOP and the S&P 500:

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