KeyBanc Remains Bullish On Square On Potential Seller Investment

Square Inc SQ is potentially undertaking seller investment initiatives, which could result in an improvement in gross present value (GPV) in the second half of 2020 and lead to stable GPV growth with a payback period of five to six quarters, according to KeyBanc Capital Markets.

The Analyst

KeyBanc’s Josh Beck maintained an Overweight rating on Square with a price target of $75.

The Thesis

Although Square’s planned seller investments have raised concerns around the total available market and competition, recent checks do not indicate notable impact on the competitive environment, Beck said in the note.

He added that GPV trends would likely be followed very closely, given the uncertainty around pricing.

If increased sales and marketing investment attracts new sellers with efficient payback periods, it could curb the ongoing GPV deceleration and this parameter could stabilize or begin improving in the back half of 2020, the analyst said.

“While NT trends are likely to feed into the bear case on decelerating GPV and increased investment,” the growth rate and opportunity for the Consumer and Cash App segments would become “better understood” once the GPV begins improving, Beck wrote.

Price Action

Shares of Square had declined slightly to $62.55 at the time of publishing on Monday.

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