Digital payment processor Square (SQ) will soon face more competition from industry incumbents First Data (FDC) and VeriFone Systems (PAY), says one analyst who downgraded the stock to sell.
Shares in Square plunged 6.3% to close at 51.67 on the stock market today. Square has shot up 208% from a year ago but has retreated from a high of 57 set on March 20.
Investors should take profits ahead of increasing competition in 2019 that will likely decelerate revenue growth and compress valuation, Brad Berning, analyst at Craig-Hallum, said in a report to clients.
“Competition is tired of Square winning and they are bringing scale, lower pricing, and functionality,” he added.
First Data could slow down Square’s growth this year, Berning says.
“First Data is rolling out the digitalization of its distribution channels to enable its partners to compete with online account opening and next day up and running against Square, beginning in Q2 and Q3 2018,” said in a report.
VeriFone also looms as a threat.
“VeriFone will have Carbon likely fully rolled out by Q4, 2018, which will arm all of the merchant acquirers and independent sales organizations that could not effectively compete with Square previously,” he added.
San Francisco-based Square makes credit-card readers that plug into phones and tablets. Square has expanded into providing financing and bank loans to small businesses.
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