Analyst: Visa Deal Is Big For Square Stock
Jack Dorsey’s Square Inc (NYSE:SQ) has been in a perpetual decline since the beginning of this year. But one analyst has an interesting prediction that could change the fate of SQ stock in the coming days.
Virtually all unicorn initial public offerings (IPOs) of 2015 have turned out to be duds. Square has been no different. However, the massive decline in Square stock beginning this year has more to do with the broader market correction than with the company. Pick any other stock and the trend will become obvious to you.
Nonetheless, Square does have its fair share of troubles. Square’s CEO has his feet stuck in two boats and it seems as though both boats are sinking. Jack Dorsey has put in his utmost effort to turn around Twitter and Square, but to little avail.
The problems faced by both his companies are synonymous. Under-monetization is making it difficult to cover costs.
Making matters worse for Square is stiff competition in the online payments processing industry. With bigwigs like Apple, Alphabet, and Samsung heavily investing in this niche, Square’s market share is gradually shrinking.
But remember, every cloud has a silver lining!
Amid all this uncertainty, one interesting development has taken place.
Visa Inc (NYSE:V) has just revealed its stake in Square. According to its latest filing, Visa’s stake in Square now stands close to 10%, making it one of the five biggest stakeholders in the company.
One analyst now has a compelling prediction on Visa’s move.
Following this news, Mark Palmer of BTIG has affirmed his “Buy” rating on SQ stock, setting a $15.00 price target. But that’s not all! Palmer has an interesting take. He believes that Square might be acquired by Visa or one of the bigger tech conglomerates, like Alphabet, Apple, or Samsung.
According to Palmer, “The announcement should serve as a reminder of SQ’s attractiveness as an acquisition target as we believe that as facilitators of electronic funds transfers like Visa, as well as technology giants such as Apple, Samsung and Google, continue to build out their payments capabilities, their efforts to grab turf within the space will drive consolidation.” (Source: “Visa’s (V) Stake in Square (SQ) Shows Attractiveness of Square as Potential Takeover Target – BTIG,” StreetInsider, February 12, 2016.)
Palmer believes that Visa’s growing interest in Square bears a positive signal on Square’s business health. Palmer said that Visa’s increase in stake “served as a vote of confidence in the company’s business model, its brand, and its ability to continue to grow both domestically and internationally.” (Source: Ibid.)
“Visa had invested in SQ in 2011, but the new stake represented an endorsement of the company’s current offerings and prospects,” reminded Palmer. (Source: Ibid.)
If Palmer is correct in his analysis, Square may have a chance to recoup losses for holders of SQ stock.
Long story short: this is one promising development that SQ stockholders must watch.