Square shares were skyrocketing and even hit an all-time new high after it was revealed that the company’s Cash app downloads had surpassed PayPal’s Venmo.
Nomura Instinet analyst Dan Dolev told clients that cumulative downloads for Square’s Cash app was at 33.5 million, higher than Venmo’s 32.9 million. This was the first time ever that the Cash app saw more downloads than Venmo.
According to the data, Square’s service grew three times faster than its competitor from PayPal in July.
“If the Cash App continues to grow rapidly, the business could reach or even exceed $100 million in sales by 2020, even without deeper active user penetration,” Dolev wrote.
Dolev increased his 12 month target on Square to $86 and also raised his revenue estimates for the company. He has a “buy” rating on the stock.
According to Dolev, having the number one position now should boost Square’s shares.
Dolev wrote, “With impressive user growth and ongoing decoupling from Bitcoin, we believe Square’s monetization efforts are increasingly bearing fruit.”
Square’s chief financial officer, Sarah Friar, had told investors during the company’s latest earnings call that the Cash app is consistently a top-30 app in the App Store.
In the second quarter in the U.S., it was the No. 1 finance app and on average a top-30 free app in the App Store, said Square.
“Interestingly, this relationship seems to go both ways. While Bitcoin prices increased in July and Coinbase downloads accelerated 11 percent, Cash App downloads remained stable at 154 percent, showing little variance from prior months’ growth rates,” Dolev also wrote.
It was at the beginning of the month that Square reported second-quarter results that beat Wall Street estimates. The company reported earnings per share of 13 cents versus the 11 cents that analysts had expected. Adjusted revenue was $385 million compared to $367.6 million that was expected.
Looking ahead however for the third quarter, Square predicted between 8 and 10 cents. Analysts were expecting 13 cents. Square issued adjusted revenue guidance between $407 million and $412 million, coming above the $350.1 million to $408.2 million range analysts called for.
Chief Financial Officer Sarah Friar said the miss on third-quarter EPS guidance was a result of “putting dollars back into the business.”
“If we build remarkable products, it will drive momentum on the top line,” she explained.
Dolev wrote, “Investors will give the company a pass because there’s no weakness, they’re just reinvesting. As long as you continue to get that revenue growth, the stock will continue to work.”