Lately, Square (SQ) stock is becoming analysts’ favorite. On Tuesday, UBS analyst Eric Wasserstrom initiated coverage on the stock with a “buy” rating. He gave the stock a target price of $81. The stock rose 3.98% on Tuesday and closed at $64.29 after UBS’s initiation.
According to Wasserstrom, the company would gain from “reaccelerating revenue growth and margin expansion in 2021,” as reported by The Fly. However, he expects weakness in the coming year. Huge investments would compress the company’s revenues and margins. Wasserstrom thinks that 2020 will be a transitional year for the company. Square’s performance could improve from 2021.
Wasserstrom is particularly bullish on the digital payments segment. Along with Square, UBS reportedly initiated a “buy” rating on Global Payments (GPN) and Fiserv (FISV). Meanwhile, UBS gave a “neutral” rating on Fidelity National Information Services (FIS).
Analysts are optimistic about Square stock
Currently, many analysts and investors are betting on the company. Apart from UBS, analysts at KeyBanc, Susquehanna, Wells Fargo, Citigroup, and Suntrust Robinson also upgraded Square stock.
KeyBanc and Susquehanna think that the company’s potential seller investments could drive better payment growth next year. Notably, the company was grappling with concerns about its valuation multiples amid its decelerating margin and GPV (gross payment volume) growth. In the second quarter, the company’s GPV, total card payments processed by sellers in dollars, rose 25% YoY but missed analysts’ expectations.
Square has been undertaking investment initiatives, which could boost its GPV. According to KeyBanc, the GPV could improve in the second half of 2020 due to these investment initiatives.
On the other hand, Wells Fargo analyst Timothy Willi thinks that the bearish trend has come to an end for Square stock. Craig-Hallum expects the company’s EBITDA to grow in 2020.
Apart from analysts, hedge funds managers and institutional investors are also bullish on Square stock. Jim Cramer, CNBC’s Mad Money host, thinks that the stock is worth owning.
Currently, around 18 out of 40 analysts have a “buy” rating on Square stock—up from 16 analysts last month. Meanwhile, 17 analysts have a “hold” rating—unchanged from last month. Only five analysts have a “sell” rating on the stock—unchanged from last month.
Stock price movement
Square stock has risen 14.6% this year as of Tuesday. However, the stock still lags PayPal (PYPL) and Shopify (SHOP) year-to-date. PayPal and Shopify have returned around 23.2% and 149.9%, respectively, this year. At the closing price on Tuesday, the stock is trading 22.7% lower than its 52-week high of $83.20 and 29.0% higher than its 52-week low of $49.82. Square stock had a market cap of around $27.5 billion on Tuesday.