Square Exceeds High Expectations, Sets Even Higher Bar For The Rest Of The Year

Shares of Square Inc SQ gained more than 9 percent Thursday morning and hit an all-time high of $19.99 in reaction to a better-than-expected first-quarter report.

BTIG's Mark Palmer maintains a Buy rating and $20 price target on Square's stock after the company delivered solid results in spite of high expectations.

According to the analyst, Square's report was "impressive," most notably led by a 36 percent year-over-year growth in adjusted EBITDA to $27 million, which came in ahead of his own estimate of $18.1 million. In addition, the company guided to an adjusted EBITDA margin of 8 percent, but it delivered a superior 13 percent.

Square also reported a 39 percent year-over-year increase in revenue to $204 million, which also came ahead of the consensus estimate of $192.8 million.

Even More Important To The Story

Palmer noted more important to Square's story beyond the headline numbers is the company's growth in its subscription and service-based segment. The analyst believes this is vital to the company's transition from a micro-merchant to a broad business platform for businesses of all sizes.

In addition, the subscription and service-based segment boasts higher margins than the core payments business and could better contribute to Square's profits as it is expected to grow moving forward.

Bottom line, Palmer argued that Square "surmounted" an already high bar in its earnings report but "set an even higher one" for the fiscal year with its guidance raise. As such, this could "shake out some more of its remaining doubters."

At last check, shares of Square were up 10.45 percent at $20.19.

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