Analysts Break Down Square Following Q4 Earnings

The market wasn’t impressed by Square Inc SQ’s Q4 earnings report, sending the stock lower by more than 2.5 percent in the days following the report.

Here’s a rundown of what Wall Street analysts had to say about the stock following its latest report.

Voices From The Street

• Barclays analyst Darrin Peller said Square once again demonstrated impressive growth in new products and large merchant revenue. “We expect this trend to continue, particularly driven by the Square Register, which we see as potentially competitive with other iPOS offerings, as well as the partnerships with Eventbrite, which evidences Square’s omni-channel capabilities,” Peller wrote.
• Morgan Stanley analyst James Faucette said Square demonstrated even stronger balance of its business in the fourth quarter. “We see an incremental opportunity to take advantage of FDC’s struggles as SQ move upmarket persists, and maybe the Street will better take mgmt at its word regarding investment plans to sustain high growth,” Faucette wrote.
• Cantor Fitzgerald analyst Joseph Foresi said Square’s increasing market penetration, end user growth and expanding margins is a winning recipe for investors. “We expect rapid growth to continue and further margin expansion going forward, driving stock performance,” Foresi wrote.
• Credit Suisse analyst Paul Condra said Q4 was unquestionably strong, Square’s 2018 guidance was just modestly ahead of consensus estimates. “Given the stock’s lofty valuation, we expect the market may take a neutral to slightly negative initial view of this print, although the strong top line will likely keep growth investors satisfied.”
• William Blair analyst Robert Napoli said guidance was likely conservative, but the stock is fully valued. “We believe Square will have relatively more negative volatility in its earnings in an economic downturn given the focus on the SMB market and the growing exposure to both commercial and eventually consumer credit,” Napoli wrote.
• Stifel analyst Scott Devitt said the only thing keeping him on the sidelines is Square’s pricey stock. “Square continues to move up market with larger sellers and omni-channel, international business, and the Cash App are still in the early stages,” Devitt wrote.
• Wedbush analyst Moshe Katri said Square needs significant EPS and revenue beats to maintain its current valuation. “We like SQ’s innovative approach for targeting the incremental needs for integrated payments solutions by SMBs, incorporating best-in-class hardware, software, solutions with ancillary services,” Katri wrote.

Ratings And Targets

Wall Street remains mostly bullish on Square stock following its latest report, but some analysts are more bullish than others:

• Barclays has an Overweight rating and $51 price target.
• Morgan Stanley has an Equal-Weight rating and $40 price target.
• Cantor Fitzgerald has an Overweight rating and $52 price target.
• Credit Suisse has a Neutral rating and $37 price target.
• William Blair has a Market Perform rating and no price target.
• Stifel has a Hold rating and $46 price target.
• Wedbush has a Neutral rating and $50 price target.

Square's stock as trading around $45.75 at time of publication.

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