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Square’s rally this year is far from over, with another 15% upside from here: Credit Suisse

Key Points
  • Credit Suisse upgraded Square to "outperform" from "neutral" with an $81 price target.
  • Pete Najarian predicts Square's free cash flow will continue to grow past 2020.
  • Square stock has risen over 100% year-to-date.

Credit Suisse is turning more bullish on Jack Dorsey’s mobile payment company, Square, despite the 100% rally in shares this year. The firm raised its rating on Square to “outperform” from “neutral” and raised its price target to $81, one of the highest on the Street.

“Square’s evolution from a payment company to a differentiated consumer and merchant services platform increases our conviction that the company can extend its business well beyond micro-merchants to include SMB and middle-market companies,” analyst Paul Condra wrote in a note to clients Thursday. “Square’s expanding range of consumer and merchant tools increases its utility to larger merchants, while also introducing new revenue opportunities from the scaling of alternative products…”

Virtus Investment Partners’ Joe Terranova sees user growth as another major catalyst for the stock, as it competes with industry rivals like PayPal.

Credit Suisse raises its price target for Square by more than 80%
Credit Suisse raises its price target for Square by more than 80%

“We’ve heard about the challenges they would have from PayPal’s Venmo… I think it’s 31 million downloads they’ve had, which is only 200,000 less than Venmo. So, clearly, there is a lot of acceleration in terms of user growth for that. It’s a fantastic story and I think it continues higher.”

UBS’ Head of Asset Allocation Erin Browne also believes in the payments company’s growth prospects going forward as it implements new products.

“They’ve only really breached 1% of the addressable market right now...There is a big opportunity here especially as they start to pivot in other areas,” Browne said on Thursday’s “Halftime Report.”

Investitute’s Pete Najarian argues the rally in Square – which has added more than $14 billion in market cap year-to-date to its valuation – still has more room to run over the next few years.

“Free cash flow stands out more than anything…” Najarian argued. “The free cash flow is going to triple by 2019 and then go even further in 2020. Those are huge numbers.”

Square is scheduled to report earnings after the closing bell on August 1st.