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SQ

Square

$66.06

-0.41 (-0.62%)

10:51
07/10/18
07/10
10:51
07/10/18
10:51

Analysts moving to sideline on Square as growth seen priced in

Two Wall Street analysts downgraded Square (SQ) to Neutral-equivalent ratings after assuming coverage of the stock. Jefferies analyst John Hecht argued that while he sees "broadly positive fundamentals" for the company, the shares seem fairly valued at current levels. Voicing a similar opinion, Oppenheimer analyst Glenn Greene told investors that Square's small and midsized business value proposition, strong execution and likely continued robust growth are tempered by valuation considerations. VALUATION CONCERNS: In a research note to investors this morning, Jefferies' Hecht downgraded Square to Hold from Buy and raised his price target on the stock to $63 from $60 after assuming coverage of the name. While the analyst acknowledged that its positioning and secular tailwinds all point to a long runway of profitable growth, he believes the shares are fairly valued and reflect a balance of a strong opportunity set alongside risks such as competition and high growth targets in nascent business segments that requires strong execution. Meanwhile, Oppenheimer's Greene downgraded Square to Perform from Outperform after assuming coverage of the name as his admiration for its SMB value proposition, strong execution and likely continued robust growth is tempered by concerns about the stock's valuation. Greene acknowledged that the company's simple, easy-to-use, and tightly integrated payments and software platform has gained significant traction with U.S. SMBs, driving recent adjusted revenue growth well above its long-term 20%-25% annual target range. Newer products/solutions including Instant Deposit, Caviar, and Capital represent an ever-increasing proportion of revenue and drive quite robust Subscription & Services growth, he contended. However, while Greene is optimistic that Square's robust growth will persist, he estimates that greater than 30%/55% revenue/EBITDA growth compound annual growth rates are priced into shares. As such, he sees "meaningful risk if growth moderates or execution falters." PIPER JAFFRAY UPS TARGET: In a research note of his own, Piper Jaffray analyst Jason Deleeuw raised his price target for Square to $63 from $49 after updating his model to reflect the recent acquisition of Weebly and convertible note issuance. The analyst continues to believe Square's guidance is conservative relative to the revenue growth momentum being driven by its "expanding solution ecosystem for merchants." Nonetheless, Deleeuw reiterated a Neutral rating on the shares, citing an "elevated" relative valuation. PRICE ACTION: In morning trading, shares of Square have dropped almost 1% to $65.88.

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    Aug

SQ Square
$66.06

-0.41 (-0.62%)

07/10/18
07/10/18
DOWNGRADE

On The Fly: Top five analyst downgrades
Catch up on today's top five analyst downgrades with this list compiled by The Fly: 1. Walgreens Boots Alliance (WBA) downgraded to In Line from Outperform at Evercore ISI. 2. Chipotle (CMG) downgraded to Underperform from Neutral at Mizuho with analyst Jeremy Scott saying after an 80% rally since the new CEO appointment, Chipotle shares currently price in an "aggressive recovery" in both comps and margins. 3. Biogen (BIIB) downgraded to Neutral from Outperform at Baird with analyst Brian Skorney saying that following a quick ~35% move since his April upgrade, he is taking his gains off the table on the back of the BAN2401 results. 4. eBay (EBAY) downgraded to Hold from Buy at SunTrust with analyst Youssef Squali citing the anticipated impact of the recent U.S. Supreme Court decision that forces collection of online sales tax on a state level and reverses the 1992 e-commerce precedent. 5. Square (SQ) assumed and downgraded to a Hold from Buy at Jefferies and a Perform from Outperform at Oppenheimer. This list is just a portion of The Fly's full analyst coverage. To see The Fly's full Street Research coverage, click here.
07/10/18
JEFF
07/10/18
DOWNGRADE
Target $63
JEFF
Hold
Square assumed with a Hold from Buy at Jefferies
Jefferies analyst John Hecht downgraded Square to Hold from Buy after assuming coverage of the name. The analyst raised his price target for the shares to $63 from $60. The analyst sees "broadly positive fundamentals" for the company, but believes the shares are fairly valued at current levels. He views competition as well as "high growth targets in nascent business segments" as risks for Square.
07/10/18
OPCO
07/10/18
DOWNGRADE
OPCO
Perform
Square assumed with a Perform from Outperform at Oppenheimer
Oppenheimer analyst Glenn Greene downgraded Square to Perform from Outperform without a price target after assuming coverage of the name. While the analyst is optimistic that Square's "robust growth will persist," he estimates that greater than 30% and 55% of annual revenue and EBITDA growth are priced into the shares. As such, he sees "meaningful risk if growth moderates or execution falters."
07/10/18
PIPR
07/10/18
NO CHANGE
Target $63
PIPR
Neutral
Square price target raised to $63 from $49 at Piper Jaffray
Piper Jaffray analyst Jason Deleeuw raised his price target for Square to $63 after updating his model to reflect the recent acquisition of Weebly and the convertible note issuance. The analyst continues to believe Square's guidance is conservative relative to the revenue growth momentum being driven by its "expanding solution ecosystem for merchants." Deleeuw keeps a Neutral rating on the shares citing an "elevated EV/revenue relative valuation," but he acknowledges that downside risk to consensus revenue estimates is low.

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