Square 'Made Up' For Last Quarter; Morgan Stanley Raises Price Target To $11

Square Inc SQ reported robust 2Q16 results, with the key metrics beating expectations, including the adjusted EBITDA, GPV and adjusted revenue.

Morgan Stanley’s James E. Faucette maintains an Equal-Weight rating on the company, while raising the price target from $10 to $11.

Solid 2Q

“While there was some help from tax related items, GPV growth, transaction revenues and Adjusted EBITDA margins were all ahead of expectations,” Faucette mentioned.

The analyst believes the 2Q16 results were more in-line with investor expectations, and management appears to have delivered after a “messy print” for 1Q16.

“Printing upbeat quarterly results potentially also serves well for employee morale as SQ anticipates a pick up in stock selling activity in the coming quarters following the lock-up expiration in mid-May,” Faucette pointed out.

Related Link: Can Square's Online Lending Platform Survive Competition?

Core payment trends continued to be strong during the quarter, with GPV growing 42 percent year-on-year, well ahead of the estimate of 29 percent, driven by better-than-expected new merchant additions, along with improving GPV retention from the existing merchant base.

However, the analyst prefers to remain on the sidelines due to the current stock valuation.

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