Oppenheimer Upgrades Square On Massive Digital Shift In Commerce

Square Inc’s SQ business model positions the company to sustain “elevated growth levels for multiple years,” according to Oppenheimer.

The Square Analyst: Jed Kelly upgraded Square's stock from Perform to Outperform, while establishing the price target of $185.

The Square Thesis: COVID-19 has resulted in a “massive shift in digital commerce requiring merchants to rapidly adopt omni-channel solutions,” Kelly wrote in the note.

He added that Square’s business model has “two-sided networks of sellers and consumers,” which positions the company’s platform as a “structural winner during the recovery.”

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Square faces a total addressable market of around $160 billion and should be able to penetrate this through higher Cash App engagement and monetization, its key role in digitizing the operations of sellers, and opportunities to gain share with new small and medium businesses emerging during the recovery, the analyst said.

Given Square’s strong product adoption and attach rates in the second quarter, Kelly expects segment gross profit to grow at a solid 54% compounded annual rate between 2020 and 2022.

SQ Price Action: Shares of Square rose 2.3% to $153.12 at the time of publication Thursday.