The rumor mill has spun into action stating Amazon might soon be accepting bitcoin and other cryptocurrencies as a form of payment, which naturally kicked off a crypto rally in the early hours of Monday, as prices surged across the board. One company already reaping the benefits of increased BTC adoption is Square (SQ) and with the stock viewed as closely tied to bitcoin’s fortunes, the news could be a boon for the fintech player.
Although, to be fair, Square does not seem to need a helping hand from anyone. In fact, heading into next week’s Q2 earnings (Thursday, Aug 5th after the close), Deutsche Bank’s Brian Keane thinks Square’s bitcoin endeavors position it to potentially beat the analyst’s estimates.
Keane expects SQ’s total net revenue to grow by 112% year-over-year to $4.071 billion, while Gross Profit will increase by 77% from the same period last year to $1,053 billion.adj.
That said, with bitcoin volumes and adoption “remaining strong,” Keane thinks there’s the potential for revenue to grow by a huge 175% year-over-year in the quarter. Additionally, “driven by Seller upside from strong reopening spend” and ongoing demand for the Cash App – which despite lower stimulus benefits and tougher comps should exhibit a robust display due to “continued strength” in Cash Card – Gross Profit could potentially increase year-over-year by as much as 89%.
And if that upside target is hit, Keane thinks it could result in EPS coming in $0.05 higher than his “core” estimate of adjusted EPS at $0.37.
Looking ahead, there is also another growth driver coming into play for Square. The company recently launched Square Banking – a suite of products “addressing the growing, unmet small business demand for financial services.” With spend “accelerating” across open small businesses, Square Banking’s recent launch positions the company as a “banking leader among small businesses,” ready to take advantage of the economic recovery.
So, great news for Square and small businesses, but down to the nitty gritty, what does it all mean for investors? Keane reiterated a Buy rating along with a $330 price target. There’s upside potential of 25% from current levels. (To watch Keane’s track record, click here)
The rest of the Street has a more conservative outlook; the forecast is for one-year gains of ~12%, given the average price target clocks in at $288.80. Overall, the analyst consensus rates this stock a Moderate Buy, based on 17 Buys, 4 Holds and 1 Sell. (See SQ stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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