Pacific Crest Starts Square (SQ) at Sector Weight

Pacific Crest initiates coverage on Square (NYSE: SQ) with a Sector Weight rating. Analyst Josh Beck said meaningful near term upside requires stellar execution.

"Square's next critical milestones are monetizing unique data assets beyond payments and pivoting up market. While we are constructive on the core processing opportunity, our optimism is balanced by the market's high expectations for execution and the nascency of lending and software initiatives. We see a 12-month fair value of $10 to $11. Pristine execution underlies a $15
bull case," said Beck.

"Penetration, expansion and mainstream usage should sustain net revenue retention of 110%-plus in a segment with above-average churn. We are optimistic that Square can continue to add several hundred thousand customers per year and generate upside to our 2016 estimates. However, the bar is high—an 8% jump in EBITDA margins in 2017 may be difficult—and we are cautiously biased on meaningful upside given the success required in execution, lending and software," added the analyst.

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 $10.32 yesterday.

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