Square Inc. is seeing new momentum with its Cash app, which could help propel the stock to $ 300, according to Mizuho analyst Dan Dolev.
Dolev raised his target for Square’s share price to $ 300 from $ 225 in a note to clients Thursday, becoming the most bullish analyst covering Square SQ, + 2.24% among those tracked by FactSet. The action was up 3% in Thursday morning trading.
The Cash app is Square’s mobile wallet that allows people to send money to friends, buy and sell bitcoin, and invest in stocks. Core money transfer features put the company against PayPal Holdings Inc.’s PYPL, + 0.92% Venmo, but Dolev said the Cash app appears to be making inroads in areas that are more generally strongholds of Venmo.
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The Cash app is believed to be popular in the Southeastern states, while Venmo is more popular in the coastal states, including New York and California, although Dolev said his recent analysis of Google search trends revealed that research for the Cash app is growing in the most populous states. In 2017 and 2018, the Cash app made up about 40% of searches for Venmo or the Cash app in the 15 most populous states. As of April of this year, however, the Cash app has achieved a 60% share of those searches.
Additionally, Dolev is optimistic about the more diverse ways Square monetizes the Cash app. Previously, the main driver of the Cash app’s profits was its instant deposit feature, which allows users to pay a small fee to transfer their money out of the app. Dolev estimates that this feature accounted for nearly 80% of Cash App’s gross profit out of 84%, but it sets that figure at 54% for the last quarter because Square has seen increased traction for things like its Cash Card debit card. and its Cash App business platform, on which businesses pay fees to use the app as a means of accepting payments.
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Dolev likes that Square sees new customers quickly adopting revenue-generating features. The cohort of roughly 8 million users added by Square in 2018 saw an estimated gross profit per user of $ 8 that year, he said. Estimated gross profit per user rose to $ 22 in 2019.
Square shares have gained 206% so far this year while the S&P 500 SPX, -0.67% is up 10.4%.