What To Watch In Square Earnings Report

Square (SQ) is scheduled to report results of its fourth fiscal quarter after the market close on February 23, with a conference call scheduled for 5:00 pm EDT. What to watch for:

1. TARGETS UPPED AHEAD OF RESULTS: On Monday, Mizuho analyst Dan Dolev raised the firm's price target on Square to $380 from $300, while keeping a Buy rating on the shares. The analyst believes Square "is simply undervalued." Dolev's terminal value discounted cash flow analysis shows that by 2031, Cash App and Seller GP may exceed $30B and $6B, respectively. His base case implies a share price of $380 and his bull case implies over $650. With less than 3% penetration of a $165B total addressable market, enhanced momentum with bitcoin's ascent, and an inflow of equity traders post-GameStop, Square is "barely scraping its full potential," Dolev contended.

Keeping an Overweight rating on the shares, Barclays analyst Ramsey El-Assal also raised the firm's price target on Square to $320 from $260. The recent "success and rapid growth" of Square's Cash App has left many investors asking about the longer-term potential of this business, El-Assal told investors in a research note. Based on his analysis, El-Assal thinks 2025 revenues of $10B-plus are feasible, which would represent 50% annual growth from 2020. Cash App revenue has grown dramatically in the last few years, but the product is still relatively young, the analyst added.

2. SQUARE BENEFITS FROM TRADERS LEAVING ROBINHOOD: Mizuho analyst Dan Dolev said earlier this month that his survey of retail stock traders showed Square's Cash App benefited most from the recent drama surrounding Robinhood's trading restrictions on stocks like GameStop (GME). Nearly 40% of the 80 survey respondents who switched to other retail trading apps said they shifted to Cash App, exceeding users leaving for other retail trading apps like Stash, Fidelity or TD Ameritrade, Dolev told investors in a research note. Of those who switched to Cash App, about one-third were net new users, and nearly three-quarters expressed interest in additional products such as bitcoin and Cash Card, the analyst added. He also noted that nearly 50% of those who reported leaving Robinhood said they would consider returning at some point.

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