As a financial technology company for small and medium-sized enterprises (SMEs) square (NYSE: SQ), as expected, took a big blow just before the COVID-19 pandemic began last year, as many SMEs were forced to temporarily close their doors during wider closings.
This was particularly true for local retailers such as restaurants, which were particularly hard hit and only started to recover in the last few months.
However, Square’s business rebounded in the third quarter of 2020 as small and medium-sized businesses scrambled to set up an online store and undertake digital transformations, resulting in an increase in Gross Payment Volume (GPV) for the mobile payment company. Like many growth-focused tech stocks, Square soared over the past year, gaining nearly 250% in 2020.
Additionally, Square has aggressively expanded into cryptocurrency offerings in recent years as CEO Jack Dorsey is a prominent cryptocurrency proponent. Companies that accept cryptocurrencies tend to have higher correlations with cryptocurrency prices, for better or for worse, as the digital asset class remains very volatile.
The stock now trades around $ 247, or 345 times earnings. Wall Street analysts’ price targets range from a high of $ 380 to a low of $ 89, with an average price target of $ 273.
square (NYSE: SQ)
Price: $ 246.7 (as of July 6, 2021)
Square stock forecast 2021
Thanks to the momentum Square has built through 2021, the company is expected to see excellent growth across its business this year. The good news for Square is that small and medium-sized businesses are unlikely to revert to their old habits after embarking on digital transformation.
The benefits associated with increased operational efficiency and other aspects of your business are just too powerful and there is no going back.
Square previously made sales forecasts but suspended the practice last year due to the macroeconomic uncertainties related to the public health crisis that is ongoing in many markets around the world where Square operates.
In the absence of top-line transparency, the company now provides its estimates for specific expenses. Adjusted operating costs are projected to increase $ 1 billion this year to $ 1.1 billion from 2020 levels, a 50% growth in the middle.
Analysts are optimistic about Square’s outlook and expect revenue to grow 115% this year to $ 20.4 billion. That performance is expected to translate into adjusted earnings per share (EPS) of $ 1.51.
Square stock forecast 2025
Wall Street expects sales numbers to continue to grow in the coming years, albeit at a slower pace than the breakneck growth analysts are forecasting for 2021. Square’s revenue could grow at an average annual growth rate (CAGR) of 11% if analyst models prove correct.
This is how much revenue Square is expected to generate each year.
|2021||$ 20.4 billion||115%|
|2022||$ 22.9 billion||12%|
|2023||$ 26 billion||14%|
|2024||$ 29.1 billion||12%|
|2025||$ 34.3 billion||18%|
Adjusted earnings per share will grow faster with Square’s operational leverage, which allows profitability to outperform revenue growth as margins grow.
|year||Adjusted EPS||Year-on-year growth|
Square is continuing to expand its offerings in both its seller ecosystem and the Cash app, which can handle a growing range of financial services for users, including cryptocurrency trading and merchant loyalty programs.
Square Stock Forecast 2030
If you zoom out, Wall Street sees Square’s sales approaching $ 40 billion by the end of the decade. Long-term models should always be viewed with caution, as a lot can change over such a long forecast period. The broader fintech sector in particular has developed rapidly and competition will only intensify from here.
Against this background, here are the analysts’ forecasts up to 2030.
|2026||$ 26.3 billion||(23%)|
|2027||$ 29.1 billion||11%|
|2028||$ 32 billion||10%|
|2029||$ 35.1 billion||10%|
|2030||$ 38.4 billion||9%|
In terms of profitability, Adjusted EPS could skyrocket nearly 13x compared to the $ 0.84 adjusted EPS square for 2020.
|year||Adjusted EPS||Year-on-year growth|
Square bull case
Square has done a remarkable job in creating a comprehensive ecosystem of services for merchants that enables the company to target ever larger businesses. Midsize sellers processing over $ 500,000 annual GPV now make up the majority of the GPV.
The company is prioritizing international expansion and recently launched Square Register in the UK and Australia and Square Terminal in Japan. The international seller GPV is experiencing strong growth despite regional bans. Continued overseas execution will be a critical area that bullish investors should look out for.
Square’s Cash app, which originally started out as a peer-to-peer (P2P) payment service, is also evolving into a full-fledged platform that can accept paycheck deposits, tax returns, and other features normally associated with traditional bank accounts. Users can now also invest in cryptocurrencies and stocks via the app.
As the Cash app continues to gain traction, Square has the opportunity to become essential for merchants and consumers alike.
Square bear suitcase
However, the path to success will not be easy, as competitors are also developing innovations at a breathtaking pace. Competitors include big loyal players like PayPal (NASDAQ: PYPL) as well as newer participants like SoFi (NASDAQ: SOFI), among many others.
Square has done well to defend its SMB niche against larger companies that have tried to replicate the company’s success in mobile payments and commerce services, but the market for consumer apps that want to become a one-stop shop for financial services is booming like never before.
SoFi has emerged as a particularly prominent competitor of the Cash app as the competing app offers everything from loans to insurance and more.
Since Square stocks trade at elevated valuation multiples due to high investor expectations, the stock could be prone to multiple contractions if its growth is called into question for any reason, such as: B. due to competitive threats or volatility in the cryptocurrency market.