NEW YORK (TheStreet) -- Square (SQ) is a good investment because it has "an extremely large addressable market," Barclay's Darrin Peller said on CNBC's "Power Lunch" on Tuesday afternoon. The stock is down about 15% YTD.
His comments come ahead of the company's 2016 third quarter report, due out after today's closing bell. The mobile payment processor that went public in November 2015 is expected to report a loss of 11 cents per share on revenue of $172.6 million.
A number of analysts say that Square lacks a plan for profitability because it doesn't make enough off of transactions. But Barclays believes the company has about a trillion dollars in spend "that none of the other payment companies have done a good job capturing," Peller said.
That's because the company has a clear market plan, which is to go after "mom and pop" stores that were previously using cash exclusively, such as ice cream trucks or garage sales, he explained. Companies like Visa (V) and Mastercard (MA) love this strategy.
Square is already profitable, but it's just choosing to spend its money to "invest in other areas," Peller argued. By 2018 and 2019, the company's EBITDA margins will be over 15%, and by 2020, they will be "well over" 25%.
The firm has an "overweight" rating and $15 price target on the stock. Square was co-founded in 2009 by Jack Dorsey, who splits his time between running Square and Twitter (TWTR).
Shares of Square were lower in late afternoon trading on Tuesday.