Square Stock Gains 3%, Target Price Up On Growth Prospects

Square Inc.’s (NYSE:SQ) price target was recently increased 20% to $66 from $55 by Stifel’s analyst Scott Devitt.

The analyst believes that the Weebly deal will bring about new growth opportunities for the company in the near future.

Following the news, Square’s shares have inched up 3.01% in response, eventually closing at $61.20. Also, shares of Square have been steadily treading higher on a year-to-date basis. The stock returned 76.35% compared with the industry’s rally of 13.39%.

Why the Hike?

Analysts at Stifel remain optimistic about Square’s market dominance in the payment space. The analysts believe that the recently closed acquisition of Weebly on May 31 will further aid in the growth of the company.

The buyout will help Square improve the omni-channel business by combining Weebly’s web presence tools with Square’s in-person and online offerings. This will enhance the company’s service to its sellers. Consequently, the seller base is likely to improve with growing demand for omnichannel business solutions.

Moreover, Weebly offers services like paid website design and hosting, free website hosting, an online store and marketing tools to its huge customer base. It has a total of 625K paid subscribers, out of which 40% belong to the non U.S. region. All these endeavors are expected to drive top-line growth of the company in the near term as well as in the long run.

Devitt wrote, "We are raising our long-term revenue estimates to reflect the incremental Weebly revenue, upside from strong secular tailwinds in the digital payments space, and Square's growing total addressable market as the company bolsters its omnichannel commerce capabilities and expands in key international markets."

Outlook

Recently, Square revised its guidance for the second quarter and full-year 2018. The company raised its expectations regarding total net sales and adjusted revenues.

Square now expects total net revenues between $744 million and $764 million for the second quarter, up from the earlier guidance of $740-$760 million. Further, adjusted revenues are now anticipated to lie in the range of $362-$367 million compared with the previous guided range of $355-$360 million.

Also, for 2018, Square expects total net revenues between $3.03 billion and $3.09 billion, up from the previous guidance of $3-$3.06 billion. Adjusted revenues are anticipated to lie in the range of $1.45-$1.48 billion, which is also higher than the prior range of $1.4-$1.43 billion.

We believe that Square’s robust product portfolio and entry into the bitcoin space are positives for business growth. The strong performance of CashApp along with its global expansion will continue to drive top-line growth of the company.

Stocks to Consider

Square currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the technology sector are Littelfuse, Inc. (NASDAQ:LFUS) , Groupon, Inc. (NASDAQ:GRPN) , both sporting a Zacks Rank #1 (Strong Buy), and Amazon.com, Inc. (NASDAQ:AMZN) , holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings per share growth rate for Littelfuse, Groupon and Amazon is projected at 12%, 6.5% and 30.2%, respectively.

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