Price target lifted by $11
Competition with larger incumbents like PayPal (PYPL) is unlikely to slow Square’s (SQ) growth, according to Instinet analysts. On June 15, these analysts lifted the price target on Square stock from $22.00 to $33.00, as reported by MarketWatch. The move reflects their view that Square could continue to gain share in the merchant payment processor market.
According to Instinet, Square’s products and services would draw even large merchants. Square is more popular among small merchants who take advantage of its low-cost products and services such as point-of-sale hardware and business credit.
Low-cost services to draw large merchants
Square shares its CEO, Jack Dorsey, with Twitter (TWTR) and noted recently that it had supplied $1.5 billion in small business loans since it launched its credit line product three years ago. PayPal and Amazon (AMZN) are also engaged in small business lending as they seek to unlock new revenue streams and improve customer retention.
Instinet analysts argue that Square’s low-cost services are attractive to large merchants keen to minimize their expenses. These analysts expect Square to continue onboarding large merchants, which would boost it gross payment volume by 33.0%. Square’s gross payment volume rose 33.0% to $13.7 billion in 1Q17.
Playing in a crowded field
However, Square is playing in a crowded market. Large retailers like Amazon and Alibaba (BABA) have their own native payment services, making it difficult for Square to integrate into their platforms.
Square’s peer-to-peer business, which it uses to attract customers for its more promising operations, is set to face stronger competition as Apple (AAPL) enters the money transfer business with Pay Cash.