Wells Fargo saw Block Inc SQ as a unique disruptor within Fintech and looked to sustain share gains by its Square and Cash App businesses over the next two years.
Square appears particularly well-positioned to gain share as it continues moving upmarket and expanding internationally. Similarly, it saw Cash App's growth remains strong as it continues attracting highly engaged users to the platform.
Further, it also appreciated the ongoing "connecting" of Square and Cash App (along with Afterpay). It expects the dynamics would support Block's solid and above-peer revenue and gross profit growth rates, driving further appreciation in the shares and rated SQ Overweight.
Wells Fargo was positive on the LT positioning of Lam Research Corp LRCX, given 1) the rising capital intensity in memory and 2) Lam's competitive positioning for deep etch combined with architectural ships driving incremental opportunities.
It maintained that Equal Weight rating is driven by a preference for companies most exposed to lead-edge foundry/logic spending.
Wells Fargo had an Overweight on Okta Inc OKTA as it expects the Auth0 acquisition as a game-changer for Okta. Wells Fargo saw growth in the core business (ex-Auth0) remains strong.
The new IGA and PAM products, set to be launched in mid-2022 and 2023, respectively, should drive more significant deals and market share gains.
Okta will continue progressing toward its targeted FCF margin of 20% over the next four years, which is not yet reflected in the current valuation.
Price Action: SQ shares traded lower by 6.42% at $107.16 on Thursday.
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