BTIG questions Square's strategy to get into the loan business
BTIG analyst Mark Palmer brings up the question--would Square) Be better off or worse off if it succeeds in receiving approval for an industrial loan company charter?
He reiterates his sell recommendation; 12-month price target is $30, based on 20x FY20E adjusted EBITDA of $662M.
SQ -0.4% in premarket trading.
Palmer's answer: "On balance, the downside for SQ from acquiring an ILC charter may ultimately outweigh the upside, in our view."
SQ’s expanding dependence on credit to drive growth "ultimately will weigh on its multiple." It's multiple is already stretched and likely inflated by "unwarranted enthusiasm" about the its business in bitcoin through its Square Cash app.
Yesterday, news came out that Square had withdrawn its application to the FDIC for an industrial loan company charter, but intends to re-file after strengthening the application. That highlights the company's focus on credit , he say.
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