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.