Instinet Starts Square (SQ) at Buy (Earlier)

Nomura's Instinet initiates coverage on Square (NYSE: SQ) with a Buy rating and a price target of $18.00.

Analyst Dan Dolev commented, "We initiate coverage of Square, Inc. (SQ) with a Buy rating and an $18 target price. The integrated payments sector is thriving, and Square is a consistent share gainer that benefits from a best-in-class product, strong brand, and high visibility in a largely commoditized merchant acquiring space. Our proprietary model shows large merchants growing 5- 6x faster than smaller ones, which should result in gross payment volume (GPV) doubling by 2020 as the pressure on pricing remains muted. Our peer incremental cost analysis shows 90%+ EBITDA CAGR by 2020 with margins growing to 25% (vs. 7% in 3Q16), with incremental contribution from margin-accretive services such as Square Capital. We believe Square's stock is worth $18 based on 17x our 2020 EBITDA estimate discounted back two years. We see 25% potential upside. FY16E EBITDA at $34m; FY17E EBITDA at $113m."

For an analyst ratings summary and ratings history on Square click here. For more ratings news on Square click here.

Shares of Square closed at $14.36 yesterday.

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