Square Review

Mizuho Offers New Note on Mobile Payments Leader Square

March 5, 2019         By: Steven Anderson

Square is one of the biggest names around in mobile payments, and for many in the small business market it was one of their first real exposures to the mobile payments front. Now, it’s gone under the Mizuho microscope thanks to its payments analyst Thomas McCrohan, and it sent word our way about some elements of the note McCrohan published around Square’s current performance and overall outlook.

First came good news right out of the gate; the report increased the current price target (PT) to $85, which is a hefty jump from the previous PT of $75. Earnings per share (EPS) and revenue targets were likewise raised, thanks to not only significant outperformance in the fourth quarter, but also subsequent guidance that says 2019 will see better than 45 percent organic growth.

That’s down a bit from 2018’s organic growth of 54 percent, but still worthwhile by pretty much any standard. It’s even better considering Square entered 2018 with adjusted revenue guidance of 34 percent; they’d already blown this projection away, and were on track to carry on doing likewise.

As for its immediate future, Mizuho believes that Square is currently going into 2019 with “…impressive growth at scale,” as well as “…a litany of ancillary products with high incremental margins.”

Square has already made a name for itself by being perhaps the first company to make mobile payments readily accessible to businesses of all sizes. Its simple, dongle-based mobility connections made it a hit, but it’s clear that it couldn’t stay a hit forever on the strength of that alone. So it worked to expand, and demonstrated to us all that the only real way to survive in the mobile payments space is to innovate. That’s clear from Square’s impressive expansion so far, and the fact that it’s done so for several years running now. That slight slowdown in earnings has daunted some, however, but Mizuho seems ready to roll with this particular punch.

No company can expand forever, so eventually, this trend may well slow or reverse outright. But for now, Square is proving its mettle in the mobile payments arena, making for a really impressive package.