Square is more popular than Venmo and should be the next FANG stock, analyst says

Square

Square's Cash App allows users to send money to anyone else with an account, like Venmo.

• Nomura increased its price target for Square to $125 - a 45% premium to where shares closed Monday - saying its Cash App is more popular than Venmo.
• Analyst Dan Dolev says Square should be the the next to join the high-flying tech bundle known as FANG (Facebook, Amazon, Netflix, Google).
• Follow Square's stock price in real-time here.

Square's stock price has more than doubled this year, and could rise another 45%, Nomura Instinet told clients Tuesday.

The firm raised its price target to $125 from $86, citing not only better financials and valuation, but also the fact that its Cash App has over 1 million more downloads than competing Venmo.

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"Similar to FANG stocks that have disrupted traditional markets with massive global total addressable markets (TAMs), SQ's fully cohesive solutions and rapid rate of innovation suggest that it is en route to disrupt the global payments ecosystem," analyst Dan Dolev said in a note.

"But is SQ too expensive? Not when taking into account its stellar 45% expected three-year revenue CAGR, which makes it screen more attractively than many payment peers and FANG stocks, in our opinion."

Square shares rose more than 9% Tuesday following Nomura's price target raise and the company's announcement that it would turn the payroll services it has offered since 2015 into a mobile app. That could be good news for Square if the app is as successful as Cash App.

Here's how Cash App compares to the wildly popular Venmo, according to the firm's estimates:

Nomura Instinet

"Not surprisingly, valuation is a key deterrent for some investors," Dolev wrote. "However, when factoring in the expected growth using a Price to Sales to Growth (or PSG ratio) shows that SQ is attractive vs. both payment peers and FANG stocks (Facebook, Netflix and Google)."

Square was up 160% this year.

Nomura Instinet