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Square Price Target at Wall Street High on Stimulus Potential

Deutsche Bank set its price target on payment processor Square at a Wall Street high on the potential tied to the next round of government fiscal stimulus.
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The price target on Square  (SQ)  shares was set at a Wall Street high by a Deutsche Bank analyst, who sees the payment processor potentially benefiting from the next round of government fiscal stimulus.

Deutsche Bank analyst Bryan Keane raised the investment firm's price target on the San Francisco company to $330 a share from $255. He affirmed a buy rating. 

The new price target indicates 20% potential upside from the stock's Tuesday closing price at $276.02. 

At last check Square shares were trading off 2.3% at $269.64. The stock was up 27% in 2021 through Tuesday's close.

“Depending on the pace of the recovery and timing of incremental stimulus, we see potential in our upside model for gross-profit growth to reach as high as about 85% year over year in fiscal 2021," Keane wrote. 

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That gross-profit estimate is about 40% above the Wall Street analyst consensus, he said. 

The firm expects Square to continue delivering strong operating leverage in 2021, offset by incremental investments in growth opportunities. 

Cash App gross-profit growth should continue to ease in December, the analyst said. Gross profit more than doubled, up 140%, in November from a year earlier after jumping 160% in October. The figure more than tripled in third-quarter 2020.

Those moves led Deutsche Bank to lower its fourth-quarter Cash App gross-profit growth estimate.

"More importantly, although benefits from the first round of stimulus have started to fade, Cash App should benefit from the second smaller round starting in [first-quarter 2021]," Keane wrote. 

The firm's upside model sees Square benefiting from additional stimulus in early April. Beyond that, the firm expects Cash App to benefit from monetizing new users, cross-selling products across the platform and expanding into new products over time.