Home Business News Square Earnings: Cash App, Seller and Afterpay Under the Spotlight

Square Earnings: Cash App, Seller and Afterpay Under the Spotlight

Square Earnings: Cash App, Seller and Afterpay Under the Spotlight


Over the past few years, the increasing success of the Cash App has been Square’s (SQ) biggest growth driver. This was especially true during the pandemic when the peer-to-peer offering grew at a rapid pace at the peak of the stimulus programs. While prior to the pandemic Cash App profit growth exhibited a ~100% year-over-year uptick, this increased to 276% YoY in July 2020, and then moderated to ~180% YoY in Aug/Sep.

Accordingly, when Square reports 3Q21 earnings today after the close, Deutsche Bank’s Brian Keane expects the growth to slow down to 39% year-over-year, which is also a drop from ~94% in 2Q21 as “fading stimulus benefits and difficult comps,” come into play.

That said, Keane thinks Square has enough firepower to mitigate against the growth deceleration of its star feature.

For one, the comps won’t be quite as tough when Q4 comes around, leaving “potential” for year-over-year growth to improve slightly into Q4.

Secondly, in contrast to the Cash App, Square’s Seller segment suffered during the pandemic, and Keane is expecting “strong transaction-based revenue growth driven by easier comps and strength online as well as in-store.”

The analyst anticipates Seller gross profit to increase by roughly 50% year-over-year with “strong upside potential” to ~56%. This amounts to ~26% growth on the 2-year timeframe, an increase on the ~21% growth delivered in 2Q21.

Lastly, with Seller “carrying upside” and the Cash App expected to start exhibiting signs of a rebound on a year-over-year basis in 4Q21, Keane expects attention will turn to the “significant future synergies in the Afterpay deal.” Assuming the deal to bring the Australian buy now, play later company closes at the start of next year, these synergies could lead to as much as $230 million of “incremental gross profit” in FY22, which by FY23 could increase to $1 billion.

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“Importantly” the analyst summed up, “The deal further connects the Seller and Cash App ecosystems increasing the velocity of payment flows.”

Great news for Square, then, but what are the implications for investors? Keane reiterated a Buy rating along with a $330 price target, implying shares will add 34% of muscle over the coming months. (To watch Keane’s track record, click here)

According to the rest of the Street, there’s decent upside in the cards, too; going by the $309.41 average target, shares will appreciate by 21% in the year ahead. Currently, the stock boasts a Moderate Buy consensus rating, based on 13 Buys, 4 Holds and 1 Sell. (See Square stock analysis on TipRanks)

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