FinTech: Digital Payment Company Square To Give Banks A Run for their Deposits – Analyst
Shares of the payment fintech were on a tear Monday after an analyst put a price target of $ 150.
San Francisco-based Square Inc (NYSE: SQ), a digital payment processor led by Jack Dorsey, benefited Monday from a highly bullish report by SunTrust analyst Andrew Jeffrey. The stock touched an all-time high of $ 128.36 after the analyst wrote that it could take away direct deposits from banks and ultimately sit on a market share of 20%. Square’s market capitalisation, based on Monday’s close, is $ 52.27 billion. According to a Bloomberg report Square now has a market capitalisation higher than all but four banks in the KBW Bank index.
For good measure, Jeffrey has a buy rating on the company and has assigned a target price of $ 150.
Square and COVID-19
Square added 11 million direct deposit accounts when digital payments surged during the coronavirus pandemic.
The company’s highly popular Cash App appears to be doubling up as a business account for small businesses, and this could lead to more financial services heading out of banks and towards Square.
The payment processor also gained goodwill when it processed pandemic – related government stimulus payments.
Unsurprisingly, therefore, the stock has jumped over 370% from its COVID-19 low of about $32.
Banks on the back foot
Year-to-date, the stock is up 90.17%. In contrast, the KBW Bank index is down 34.82%.
In March, the FDIC conditionally approved the application by Square Financial Services, a subsidiary, for deposit insurance.
The Utah Department of Financial Institutions also granted charter approval to Square Financial Services.
Recognized by the FDIC as a so-called “industrial loan company,” the company will likely launch in 2021.
It will operate as Square’s independent banking subsidiary. The firm will offer both small business loans and deposit services such as checking and savings accounts out of Utah.
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