- Buckingham Research Group believes that there’s more room for growth
- Currently trading at 57 times expected earnings for 2020
- CFRA disagrees with buy rating
Square Inc’s stock price has increased by another 5.5% since it issued its earnings report for Q2 2018 last week. The year-to-date increase now stands at 103.9%
Buckingham Research Group Analyst Chris Brendler, however, believes that there are enough reasons for long-term investors to still buy SQ shares.
Brendler said that investors were correct to question the current stock price, which stands at around 57 times the expected earnings per share in 2020. But, he said, things looked markedly different if one took into account the firm’s recent growth.
He said: “With accelerating momentum across a broadening suite of software/services that suddenly not only target its massive base of [small- and mid-sized businesses], but increasingly consumers, we think 2Q’s impressive acceleration is sustainable.”
According to Brendler, there is still a lot of room for Square to grow its services in the fields of digital banking, consumer lending and crypto trading.
Buckingham expects Square to sustain an adjusted earnings percentage before tax, interest, amortization and depreciation of at least 40% in the long run, and that its gross payment volume will increase from last year’s $65.3bn to $351.8bn by 2025.
Brendler also predicts that earnings per share will grow from $0.27 per share to $5.95 and free cash flow from $102m to $3.15bn. Buckingham has a price target and a “buy” rating of $85 for Square stocks.
Not all analysts agree, however. CFRA Analyst Scott Kessler called the valuation “excessive”. His company has a “sell” rating for the stock and a price target of $58.
