Square (SQ) - Get Report was climbing Monday after a Barclays analyst increased his price target to $115 from $90, saying the payment processing company's shares "have materially outperformed recently."
Shares of the San Francisco-based company were rising 6.8% to $104.63.
"We see SQ parlaying its core payments biz into a comprehensive merchant software & services play, which has expanded the TAM (Total Available Market)," analyst Ramsey El-Assal said in a note to clients. "We see SQ with a very impressive track record of identifying, then scaling, new products."
The analyst, who keeps an overweight rating on the shares, said some under-appreciated drivers were behind the recent rally, including the paycheck protection program loan mix that "suggest greater merchant resiliency than expected." The PPP program should help offset a halt in Square's capital lending, he said.
El-Assal said app download data show momentum for the Cash App, and the acquisition of Verse, a Spanish peer-to-peer payment app, will help with European expansion. Third-party data, he said, indicate continued improvement in small-to-medium business sales.
"Data from SQ’s recent PPP originations update indicates that the resiliency of the merchant base may be stronger than investors fear," the analyst said. "We note that SQ processed 2x the amount of loans for non-employer firms (i.e., sole proprietors), which we think are less likely than more traditional brick & mortar merchants to face bankruptcy as they lack obligations such as rent and payroll."
El-Assal said that he sees these “'micro merchants' as "hibernating rather than pulling the plug."
As of June 10, Square Capital said it has facilitated more than $820 million in PPP loans to more than 76,000 small businesses, up from $650 million and 60,000 businesses last reported at a May 12 conference.
By geography, the company said 34% of loans went to rural businesses, 26% to suburban business, and 39% to urban businesses.