Square Finishes 2016 On A Strong Note, Remains A Key Idea In The New Year

Square Inc SQ reported a strong fourth-quarter beat and raised its guidance. Adjacent products contributed ~5 percent of payment volume, while “loan growth and food delivery also topped our expectations, offering early proof of the platform potential,” Pacific Crest’s Josh Beck said in a report.

Beck maintains an Overweight rating on the company, while raising the price target from $17 to $18.

Q4 Results

Square reported payment volume growth of 34 percent and Square Capital origination of $248 million, representing 68 percent year-over-year growth. Subscription and services based revenue came in at $40.5 million, higher than Pacific Crest’s estimate of $37.9 million.

The company announced adjusted revenue of $191.8 million, ahead of the consensus expectation of $187.7 million. Adjusted EBITDA came in at $29.8 million, significantly ahead of the Street's estimate of $18 million, backed by lower operating expenses.

Related Link: Steve Ballmer's Quick Advice To Dorsey: Quit Square

Key Idea For 2017

The Q4 results highlighted the company’s emerging platform potential, Beck commented. He added, “Square has a rich ecosystem of transaction, SKU-level, customer and inventory data that could enable it to extend beyond payments and play a larger role in commerce, which positively ties to one of our key secular FinTech themes.”

The analyst expressed optimism regarding the "Square for retail" opportunity and termed it as an “underappreciated upside driver.”

At last check, shares of Square were up 12.03 percent at $16.85.