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Square Poised to Blast Nearly 30% Higher, Says Analyst

By Eric Volkman - May 5, 2021 at 8:37PM

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The company's secret sauce? Bitcoin.

On the back of a consumer survey conducted by merchant payments specialist Square (SQ 2.28%), one analyst has raised his price target for the company. On Wednesday KeyBanc prognosticator Josh Beck upped his target to $300 per share, well up from the previous level of $275. He is maintaining his overweight (read: buy) recommendation on the stock.

Square's survey indicates that consumer interest in investing, particularly in cryptocurrencies, is on a sharp upward trajectory. Nearly 40% of respondents said they have opened a stock trading account over the past few months. And many are interested in cryptos, notably the pace-setting one, Bitcoin (BTC -0.18%).

Bitcoins in front of financial graph display on monitor.

Image source: Getty Images.

"Over 20% of respondents reported investing in crypto with [around] 80% opening up a new account in the last 3-4 months, likely benefiting from the 500%+ increase in BTC over the last year," Beck wrote in his analysis.

Beck found that over 50% of Square's respondents used its peer-to-peer payment service Cash App. Since Cash App allows users to transact in Bitcoin, this should drive higher engagement and therefore revenue for Square.

Consequently, the prognosticator substantially raised key estimates for Square's full-year 2021. He now believes the company will post revenue of $14.4 billion, well up from the previous forecast of $12.9 billion. Beck's EBITDA (earnings before interest, taxes, depreciation, and amortization) estimate also got a boost to $600 million; it was previously $550 million.

The KeyBanc analyst's increased optimism is entirely believable. Bitcoin in particular and cryptocurrencies in general are white-hot just now, a trend that shows no sign of abating anytime soon. Mix that with Square's ever-widening merchant and consumer payments ecosystem, and you've got the recipe for a compelling stock that should remain popular with investors.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bitcoin and Square. The Motley Fool has a disclosure policy.

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