KeyBanc’s Bull, Bear Scenarios For Square’s New Reward Program

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Fintech and payments company Square Inc (NYSE: SQ) introduced&nbsp;a "Cash Boost" reward program&nbsp;earlier this month&nbsp;that gives Square Cash debit card users an instant discount or reward.&nbsp;” data-reactid=”18″>Fintech and payments company Square Inc (NYSE: SQ) introduced a “Cash Boost” reward program earlier this month that gives Square Cash debit card users an instant discount or reward. 

The Analyst

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="KeyBanc Capital Markets' Josh Beck maintain&nbsp;an Overweight rating on Square&nbsp;with an unchanged $100 price target.” data-reactid=”20″>KeyBanc Capital Markets’ Josh Beck maintain an Overweight rating on Square with an unchanged $100 price target.

The Thesis

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Census and other macro data suggests restaurant and grocery spending represents 15% of after-tax consumer spending, Beck said in a Thursday note. (See his track record here.)” data-reactid=”22″>Census and other macro data suggests restaurant and grocery spending represents 15% of after-tax consumer spending, Beck said in a Thursday note. (See his track record here.)

Among that group, the top 20 restaurant and grocery companies represent 40% of all spend, the analyst said. Assuming that Boost accounts for 1% of Cash Card spending, it results in a net yield of around 1.4% based on transaction and volume components, discount mix and other assumptions, he said. 

Under this bull case scenario, a 1.4% net yield would generate an extra $60 million in 2020 revenue, Beck said. 

If some assumptions are adjusted — such as a higher discount for coffee purchases — to generate a bear case scenario, Square will still see a net yield of around 0.5%, the analyst said. 

KeyBanc’s analysis leaves the research firm “more positive” on the Cash Card’s potential, Beck said.

Over the medium-term, Square’s partner interest in loyalty benefits such as DoorDash could create even more upside to the Cash Card’s contribution, the analyst said. 

Price Action

Square shares were down 0.82% at $71.59 at the close Friday. 

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Analyst: Square Card Could Add 0M In Annual Revenue” data-reactid=”32″>Analyst: Square Card Could Add 0M In Annual Revenue

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Photo courtesy of Square.&nbsp;” data-reactid=”33″>Photo courtesy of Square. 

Latest Ratings for SQ

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View the Latest Analyst Ratings

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