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Square and PayPal Price Targets Up on Faster E-Payment Adoption

Price targets on Square and PayPal were raised at Deutsche Bank as the investment firm expects faster adoption of e-commerce and mobile-payment services.
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Price targets on Square  (SQ) - Get Square, Inc. Class A Report and PayPal  (PYPL) - Get PayPal Holdings, Inc. Report were raised at Deutsche Bank as the investment firm's analyst expects faster adoption of e-commerce and mobile-payment services due to the coronavirus pandemic and other factors.

Separately, a BTIG analyst, Mark Palmer, raised his price target on Square to $295 from $220.

At last check San Francisco-based Square was climbing 2.9% to $239.67, while San Jose, Calif.-based PayPal was up 0.8% to $239.54.

Deutsche Bank analyst Bryan Keane, who keeps a buy rating on both companies, raised his price target on Square to $255 from $215 and on PayPal to $275 from $234. 

Keane said in a note to investors that a survey of 817 U.S. mobile tech-savvy participants found that "it’s clear that adoption of e-commerce and mobile payment services has accelerated, driven by the pandemic and expanded fintech value proposition."

The analyst said the survey highlighted "the increased secular shift to online payments and higher engagement with fintechs," particularly PayPal and Venmo, PayPal's mobile payment service, as well as better penetration and adoption of digital financial services for Square's Cash App.

"We see fintechs expanding further into traditional financial services, taking share from incumbent banking models, and moving up the sales funnel to become commerce enablers where about 60% of survey participants are interested in PYPL and SQ as a future commerce platform," Keane said.

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The analyst said use of online channels for retail physical goods purchases across the most tech-savvy U.S. mobile payment participants has reached about 83%, according to the survey.

PayPal, Venmo and Square "are well positioned to capture the accelerated shift to online and omnichannel," he said.

Meanwhile BTIG's Palmer, who also has a buy rating on Square, said the "extraordinary" growth of Square's Cash App during the pandemic has demonstrated its relevance to large groups whose underserved needs only increased during the crisis.

Palmer wrote about “the tens of millions of unbanked consumers in the U.S., the small- and medium-sized businesses struggling to survive amidst pandemic-driven restrictions, and those seeking an easy way to buy bitcoin at a time when interest in the cryptocurrency has taken off."

Palmer attributed Square's recent share-price momentum in large part to investors' use of the stock as a second-derivative play on the increasing interest in bitcoin.

But he also noted that most of the benefit to the company from its facilitation of crypto trading comes from the increase in Cash App users that it generates.

Cash App enables customers to transfer money, pay for goods and services, invest in stocks, and buy and sell bitcoin.

Square shares are trading at more than seven times their 52-week low above $32 in mid-March. PayPal has about tripled from its 52-week low above $82, set in late March.