Square has a large untapped opportunity to offer cryptocurrency payment solutions for its customers, according to one Wall Street firm.
Nomura Instinet reiterated its buy rating on Square shares, citing merchants' willingness to accept bitcoin for store payments.
"Like Amazon in its early days, we believe that little of Square's future revenue streams are currently visible," analyst Dan Dolev wrote in a note to clients Wednesday entitled "SQ Survey: Merchants Say YES! To Bitcoin." The firm's survey "shows that 60% of the participating merchants (we note that we surveyed U.S. merchants only) would be willing to accept bitcoin in lieu of USD payment. This is particularly interesting given the volatility in bitcoin in recent months."
Dolev reaffirmed his $64 price target for Square shares, representing 23.5 percent upside to Tuesday's close.
He cited how more than 7 million people are already using the company's Cash payment app, which enables its customers to buy bitcoin in most of the country. The app launched in November.
"Undoubtedly, the success of the Cash App … is a significant achievement," the analyst wrote. "Currently, an individual can set up the app in minutes and send peer-to-peer payments, store money, receive their paycheck and buy and sell bitcoin."
The firm's survey of nearly 100 Square merchant customers also revealed strong satisfaction for the company's offerings. Nearly 95 percent rated Square's services as "excellent" or "good" with only 4 percent giving the company an "average" score.
Optimism over Square's bitcoin initiatives helped drive its shares' stunning performance so far this year. Its stock is up 49.5 percent year to date through Tuesday versus the S&P 500's 3.4 percent gain.
Square shares were up 4.7 percent Wednesday after the report.