Square Lower Even as Oppenheimer Lifts Price Target to $280

Oppenheimer analyst Jed Kelly lifted his price target on Square by a third after the payments company posted stronger-than-expected earnings.
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Square  (SQ) - Get Report shares fell on Wednesday after Oppenheimer raised its price target for the financial services company by a third, to $280 from $210, and affirmed an outperform rating.

Oppenheimer analyst Jed Kelly acted after Square posted stronger-than-expected earnings for the fourth quarter.

The stock recently traded at $240.11, down 6.4% and has dropped 12% this week amid the slump in technology stocks. 

But Square has tripled over the past year as online spending during the pandemic has been strong.

“We are incrementally bullish on management’s strategy to invest in its sales force to move upstream and target more mid-market sellers (more than $500,000),” Kelly wrote in a commentary. 

Square's "data analytics and developer ecosystem is best positioned to serve sellers requiring more complex solutions, especially omnichannel.”

Further, “As Square attracts more mid-market sellers, we believe it can create a dynamic marketing platform by combining both cash/seller ecosystems through Boost,” Kelly said. Boost is Square’s cash-back card feature.

“Bottom line, these results reiterate our view that Square is a significant structural winner post-Covid 19,” Kelly said.

Morningstar analyst Brett Horn also likes the company but says the stock is overvalued.

“Narrow-moat Square reported a good fourth quarter and finished the year a little ahead of our expectations,” he wrote in a commentary Wednesday.

“However, we remain comfortable with our $78 fair value estimate. While we recognize the uncertainty inherent in deriving a long-term valuation for a high-growth, scalable business that has yet to achieve sustainable profitability, we continue to believe the current market price implies a very optimistic view of Square’s long-term prospects.”