Square Stock May Get a Boost From Its Cash Card, Analyst Says — Barrons.com
DOW JONES & COMPANY, INC. 1:17 PM ET 6/14/2019

The loyalty features that come with Cash Card from payments company Square can help grow revenue, rather than be a drag on the company’s margins, KeyBanc’s Josh Beck said in a note to clients Friday.

Square stock was down about 1% in Friday trading.

The back story. The company’s stock is up more than 27% in 2019, which is something of a lull for shares that have almost tripled over the past two years.

That longer-term surge has been driven by fast revenue growth due in part to the rising use of credit and debit cards. Square’s Cash app, which competes with PayPal’s Venmo, has also increased in popularity. The Cash Card is a debit card that is linked to customers’ Cash app accounts. That let’s them spend the money in the Cash app for purchases anywhere Visa is accepted.

The Cash Card’s loyalty program is called “Boost” and it lets cardholders choose to receive discounts of 10% or more at various restaurants or coffee shops.

What’s new. The question, Beck noted, is does “the popularity of the loyalty feature crimp Square economics or is it a catalyst to drive ‘everyday’ type of spend and ultimately improve engagement?”

Beck’s analysis left him “more positive on the revenue potential for Cash Card,” he wrote. Overall, the financial cost of the loyalty program will be “more than offset by higher engagement,” from Cash cardholders, he concluded.

Looking ahead. Beck thinks that Square will compound annual revenue growth of about 35% over the next three years and will hit have a 26% margin by 2021. His target price is $100 a share, which represents about 40% upside.