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Shares of payments pioneer Square (SQ) today rose 35 cents, or 2.8%, to close at $13.06, after Deutsche Bank’s Bryan Keane raised his rating on the shares to Buy from Hold, with a $17 price target, writing that the company is "underappreciated by the street,” and poised to benefit from "many positive trends."

The outlook on the Street could prove “conservative,” he thinks, for 2017 and 2018, and so could his own estimates, which are a bit below the Street.

For 2017, he models “adjusted revenue,” which excludes the money it gets from Starbucks (SBUX), and also “transaction costs,” of $875.8 million, and adjusted Ebitda of $102 million, for EPS of 19 cents, non a non-GAAP basis.

That compares to consensus for $949.2 million, $97.7 million, and 14 cents.

By 2018, the company could make 43 cents profit, versus Street consensus of 30 cents, he opines.

The central part of the thesis is that the company is growing fast in an attractive market:

Square is well positioned to capitalize on a large, underpenetrated and underserved market opportunity in SMB payments and with its strong brand image is able to do so with minimal customer acquisition costs. In Payments and POS services alone, US card volume is expected to represent ~$10tn by 2023 while US SMB SaaS spend is expected to represent $17bn by 2018 according to data from Nilson and IDC. SQ has delivered strong adj. revenue growth of 63% Y/Y in 2015 and we expect revenues to grow 51% Y/Y in 2016, 29% Y/Y in 2017, and 27% Y/Y in 2018 driven by further SMB penetration, expanding its dollar-based retention at existing sellers as they grow, moving up market into larger sellers, cross-selling its suite of solutions, expansion into new verticals and geographies, and the launch of new value add products and services.

And he likes how the company has moved further toward profit:

SQ achieved positive adj. EBITDA starting in 2Q16 and the company has raised FY16 adj. EBITDA guidance three quarters in a row from original guidance of $6-$12m to current $31-$33m. The adj. EBITDA margins expanded +7pts Y/Y in 2Q16 and +20pts Y/Y in 3Q16 with the company targeting mid single digit percentage point margin expansion annually and 35-40% margins long-term driven by scale and operating leverage. SQ also continues to target a 4-5 quarter payback period on each cohort (only includes payment transaction profits) and is seeing positive dollar-based retention across existing sellers. SQ continues to invest in product development as well as areas such as data science and we expect significant efficiencies in G&A. The G&A growth rate dropped to 38% Y/Y in 3Q16 from 60% Y/Y in 2Q16 and we expect further efficiencies going forward. Scale also enables the company to establish favorable partnerships with financial institutions to provide attractive and competitive pricing for Square sellers. We expect upfront investments in technology such as machine learning across support and risk operations to help reduce expensive headcount in these people intensive areas driving margin improvement. We est. adj. EBITDA margins of 5% in 2016 improving to 12% in 2017 and further to 18% in 2018.

There are other things that can be positive for the company, such as the rising tide of mobile shopping in general, he notes, and the prospect for the company to expand internationally (it gets most of its revenue from domestic merchants.)

It all comes down to the stock deserving a higher valuation, he argues, than it has — his target would be roughly 5 times the projected 2018 adjusted revenue, in terms of enterprise value, or "roughly in-line with the merchant acquirer comp group and technology growth comp group on EV/adj. S.”:

Given the solid top-line growth rate as well as scale in the business model despite maintaining necessary investments, we believe SQ is currently mis-priced […] We believe this metric is appropriate given peer group valuations with similar growth profiles. Additionally, we believe EV/adj. S is a more appropriate valuation method given the company is in the early innings of positive EBITDA and FCF.