Square to rally more than 40% because it's the ‘category leader’ in small business payments, Citi says

Jack Dorsey, chief executive officer of Square on the floor of the New York Stock Exchange at the company's IPO, November 19, 2015.
Yana Paskova | Bloomberg | Getty Images

Investors should buy Square shares because its payments offering sales will be above expectations in the coming years, according to Citi Research, which initiated coverage on the company with a buy rating.

"In our experience, the biggest stock market winners often create and/or own new product categories. We believe Square has become the de facto category leader in micro and small business commerce enablement," analyst Peter Christiansen wrote in a note to clients Friday. "Our view is that Square's commerce enablement platform, transparent offering, and disruptive SMB [small and midsize business] lending arm, Square Capital, can motivate sellers to switch from other vendors, while the secular trend towards cashless payments will help convert greenfield merchants."

Christiansen's price target is $20 for Square, whose CEO, Jack Dorsey, is also Twitter's chief. The target represents 44 percent upside from Thursday's close.

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