Square's Cash App Growth Adoption Curve Steepens Amid Improving User Metrics: KeyBanc

Square Inc SQ got a price target boost from KeyBanc Capital Markets, premised on strong second-quarter trends.

The Square Analyst: Josh Beck maintained an Overweight rating on Square and upped the price target from $125 to $140.

The Square Thesis: Square's key metrics such as user growth, engagement and transaction size accelerated in the second quarter, Beck said in a Tuesday note. (See his track record here.)

Fueled by the improving user metrics, June witnessed Cash App growth of 130% above April/May levels, indicating a steepening adoption curve, the analyst said. Cash App is a peer-to-peer mobile payment app developed by Square that now offers enhanced functionalities such as receipt of direct deposit payments, ACH payments, and stock and bitcoin trading.

The recent momentum, according to the analyst, is tied to government stimulus payments and equity trading.

"Cash App adoption related to these factors, among others, likely offer monetizable second-order benefits such as Cash Card and Instant Deposit adoption," Beck wrote in the note.

The analyst also noted a growing mainstream use case, citing Google Trends data that showed increasing search popularity in the Midwest, West and Northeast. 

As such, KeyBanc is maintaining its above-Street estimates for $299 million in CashApp revenue for Square in the second quarter, predicated on its positive Cash App outlook and encouraging macro data points.

Related Links:

Why Square Is A 'Need-To-Own' Stock For Years To Come

Square Analysts React To FDIC's Conditional Banking License Approval For Payments Company