KeyBanc Lifts Square's Price Target To $115 After Encouraging Survey Results

Payment processor Square Inc SQ continues to successfully evolve from its roots of facilitating credit card transactions based on KeyBanc's survey of 20 Square sellers.

The Analyst

KeyBanc Capital Markets' Josh Beck maintains an Overweight rating on Square with a price target lifted from $75 to $115.

The Thesis

KeyBanc surveyed 20 Square sellers to gain a better understanding of what new value-added products and software they plan to start using over the coming year, Beck said in a note. Sellers on average will adopt 3.4 new Square products over the next 12 months, which marks a 105-percent uptick from current levels and a notable increase from a similar survey last year.

Some of the new non-payment products sellers will begin using focuses on invoicing, loans, marketing and payroll. Meanwhile, the adoption of advanced products (Square for Restaurants, Retail, Square Register) is due to multiple factors, including cost and time savings along with increased revenues.

Beck said the survey also found growing interest in the $999 Square Register, which is the company's newest and most capital intensive hardware offering. By contrast, the Square Stand (iPad stand) is priced at $169 and the potential for high priced devices is encouraging as the survey also found sellers are willing to spend on hardware even if they have multiple products per location.

Seventy percent of sellers surveyed said they didn't even consider a rival service to Square when setting up, while 45 percent said Square was their first payment relationship. This should confirm the "dominant" nature of Square's brand among small businesses.

Price Action

Shares of Square were trading higher by 1.3 percent Tuesday to $98.38.

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Why Square Is Guggenheim's Top Fintech Pick

Photo credit: Tony Webster (Own work), via Wikimedia Commons