Square, Inc: Poised for another year of astonishing growth and profitability

After a stellar earnings report on February 22, 2017, Square's stock price has skyrocketed 16%. The company posted better than expected revenue and higher than expected EPS. The company's 2016 GPV of $50 billion continues to grow as the company slows growing expenses and grows new revenue streams. 

We view Square's 2017 guidance as Conservative and stands to be beaten. We expect a GPV of $66.8 billion, total net revenue of $2.25 billion (vs. $2.09-$2.15 billion), and adjusted revenue of $982 (vs. $880-$900 million). 

Square continues to grow new products a fast clip with a high success rate. While Caviar still has under delivered compared to other products, we are happy with the continued growth of Square Capital, and other Software & Data products (Now called subscription and service based revenue).

We are expecting subscription and service revenue to nearly double as square continues to add products to the portfolio and better serve their current customers. Square continues to deliver reliable products with incredible potential; we're especially excited with Square's new division of POS and retail products. The new retail-focused products should allow Square to grow market share in the retail business and cater new inventory management software to these customers. 

Overall this year we are expecting a diluted EPS of $.21 - $.25 (vs. guidance of $.15 - .19) as Square boosts profitability. We are reiterating our price target of $25 and rating the stock as a strong buy.

Price Target: $25

Strong-Buy

 

Christian PrenzlerComment