Guggenheim Calls Square “Best Idea” in FinTech, Predicts Further Gains
Jack Dorsey may be facing some annoying problems with Twitter these days but the CEO’s other company is on a bit of a winning streak. Square’s stock is currently up 5% after Guggenheim Partners raised its price target for the company to $100 ($SQ trades for around $85 a share at the moment). Moreover, as CNBC reports, the firm also declared Square its “new best idea” and “highest conviction name” in FinTech.
The latest boost to Square’s stock price continues an impressive run. So far this year the stock has gained more than 136% and had a year over year gain of 227%. However, if Guggenheim’s predictions are accurate, this could just be the beginning. In a note sent to clients this week, analyst Jeff Cantwell wrote, “We expect a strong rate of revenue growth for SQ which should drive further share price appreciation.”
CNBC recalls that Guggenheim also named Square its “best idea” back in 2016. Since then the company has diversified its focus, expanding from payments solutions for small businesses to offering a number of related services and tools. As a result Cantwell expects “substantially higher” revenues from these services in the future, exceeding current Wall Street expectations. In fact, CNBC notes that Guggenheim’s revenue estimate for Square is 10% higher than the consensus forecast for 2019.
Speaking of additional services, the firm also called out Square’s P2P payments Cash app as another source of continued growth for the company. Beyond the app currently allowing for peer to peer transfers, Bitcoin purchases, and cash back savings via its own Cash Card debit card, the company has also been exploring expansions into investing, consumer finance, and other sectors. These ambitions led Cantwell to advise, “We think Cash App’s future revenue potential is underappreciated, we see it providing a key ‘services’ role for the underbanked.” Specifically, the Cash Card saw impressive growth in the second quarter with cardholders spending a total of $250 million.
While one could argue that Square’s “jack of all trades” (no pun intended, Mr. Dorsey) approach could spread the company’s resources thin, Guggenheim seems to believe that the company’s diverse slate of products are paying — and will continue to pay — off. Furthermore Guggenheim’s praise and newly-bestowed titles for Square solidify the company’s position as one of the top FinTech companies in the U.S. Thus Square’s success in small business services, consumer tools, and on the stock market is not only a win for the company itself but also for the FinTech sector at large.
Also published on Medium.