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Square Stock Set for a Big 2021, Deutsche Bank Says

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Square shares may have had an impressive run over the past year, but Wall Street says the best is yet to come.

Analysts at Deutsche Bank boosted their price target on Square shares (ticker: SQ) to $330 apiece, up from $255, while keeping a Buy rating on the stock. The bank said the payments company may have been a “recovery play in 2020” but is poised to be a “bigger recovery story in 2021.” Square stock is already up 22% this year, after climbing more than 200% in 2020. It recently changed hands at $265 a share.

The company benefited last year as households and businesses favored digital payments over cash amid the pandemic—even though many of Square’s small-business clients faced shutdowns. 

But that’s not all that pushed shares higher. Square also gained more relevance for its mobile-payments product, Cash App, which in addition to allowing users to send money to each other also facilitates trading in Bitcoin and stocks. Late last month, amid a trading frenzy in shares of GameStop (GME), retail traders rushed to Cash App after Robinhood and other trading platforms were forced to restrict trading in volatile names, according to an analysis from Mizuho Securities. 

Fiscal stimulus payments have also helped Square as some users elected to receive their payments on the app, further boosting engagement. But that may just be the beginning of the opportunities for Cash App, and by extension, Square.

“Beyond the strong engagement from stimulus, we expect Cash App to benefit from monetizing new users, cross-selling products across the platform, and expansion into new products over time,” Brian Keane, an analyst at Deutsche Bank, wrote Wednesday. Under his more bullish scenario, gross profit growth could climb as high as 85% year over year, some 40% above consensus views.

Despite this long-term exuberance for Square shares, the stock was down 3.9% in recent trading, compared with a 0.5% drop in the S&P 500. Rival PayPal Holdings (PYPL) saw its shares fall nearly 4% amid a broader selloff in tech-friendly names, which sent the Nasdaq Composite down 1.3%.

Write to Carleton English at [email protected]

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