Macquarie Out Bullish On Square, Likes Cash App's Prospects

An upcoming marketing effort and momentum in the instant payment space from its Cash App could mean Square Inc SQ is set for a better 2020 than company officials are projecting, Macquarie said Tuesday.

The Analyst

Macquarie's Dan Dolev initiated coverage on Square with an Outperform rating and $105 price target.

The Thesis

The awareness of the Cash App relative to competitors, particularly PayPal Holdings Inc's PYPL Venmo, is growing, according to what people are searching for on the internet, Dolev said. With a boost from a coming marketing effort, there could be more than 5% upside to the company's 2020 guidance.

The bullish coverage follows strong gross payment volume growth in the third quarter and rising sales and marketing efficiency, which contribute to the positive outlook. Dolev also said that despite the planned increase in marketing spending next year, he still expects Square to meet or exceed margin targets.

Outlook Conservative

Dolev said while management guidance implies about 45% growth for the Cash App, as much as 65% growth might be possible as more potential customers hear from the marketing blitz about the competitor to Venmo and Zelle.

"Despite its success, we see an even brighter future for the Cash App amid signs of growing mind share across key Venmo strongholds," Dolev wrote. "Our analysis of Google Trends searches for 'Cash App' vs. 'Venmo' shows that Cash App is garnering increased attention in traditional Venmo strongholds like New York, California or Massachusetts."

Price Action

Square shares were up 0.7% on Tuesday, trading at $68.67.

Related Links:

4 Money Apps That Will Eliminate Cash

Why This Analyst Is Increasingly Convinced Of Venmo's Monetization Prospects

Photo credit: Mybloodtypeiscoffee, via Wikimedia Commons

Posted In: Cash AppDan DolevMacquarieVenmoZelleAnalyst ColorFintechLong IdeasPrice TargetInitiationAnalyst RatingsPersonal FinanceTrading Ideas

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.