Square stock could rise by 25% as the Cash App is developer a 'must-own' fintech innovator, Jefferies says

• Square stock could climb 25% from current levels to $300, said Jefferies in a Thursday note.
• The payments technology company was upgraded to a buy rating and its price target pushed up from $265.
• Jefferies sees its Cash App product as a key element in Square's position as a fintech disruptor.

Square stock has the potential to climb by 25% from current prices, Jefferies said in a Thursday note as it upgraded the payments company and touted its Cash App.

"Amidst a backdrop of [accelerating] disruption within payments & the broader FinTech ecosystem, we believe SQ is a must-own over the long-term as a proven innovator," Jefferies analyst Trevor Williams wrote in assuming coverage of Square by raising its rating to buy from hold.

The price target was also raised, to $300 from $265. The new target would be a 25% increase from Wednesday's closing price at $239.12. Square stock gained 3.5% Thursday, and so far this year is up nearly 10%.

Jefferies said the Cash App is the leader among consumer-facing digital wallets and so-called neobanks. The mobile app is used for money transfers and direct deposits as well as for buying stocks and bitcoin. Williams foresees it driving two-thirds of gross profit growth from this year to 2025.

"Despite an increasingly crowded landscape, we believe Cash App's large and highly engaged user base, pace of innovation, efficient customer acquisition, and attractive cohort economics position Cash App as a long-term winner," he said.

Cash App, which runs the high-profile "Cash App Friday" marketing campaign on Twitter, could reach 85 million monthly active users by fiscal year 2025, up from 40 million currently. Square's co-founder and CEO Jack Dorsey is also Twitter's co-founder and CEO.

Meanwhile, Square is working on completing its planned $29 billion stock purchase of Afterpay, a buy-now, pay-later service.

In addition to Cash App, it looks to be among Square's other pillars for financial growth, said Jefferies. "We believe the combination will be highly accretive to gross profit, and as a result, view the stock as attractively valued relative to our expectations for the pro forma growth profile."