Square has held talks to buy the music-streaming platform Tidal as part of a move to diversify its services, Bloomberg reported.
According to the report, Square (SQ) CEO Jack Dorsey has negotiated a potential deal with Jay-Z, the rapper and music mogul who bought Tidal for $56 million in early 2015. The negotiations may not result in a transaction. Square declined to comment, while Tidal didn’t respond to requests for comment when contacted by Bloomberg.
Tidal, which first launched in 2014, has been grappling with fierce competition from established streaming services, including Spotify Technology SA and Apple Music. Jay-Z’s own music has been the point of attention for the platform, but he put his songs back on Spotify last year – raising questions about the health of Tidal. The closely held service hasn’t reported subscriber figures since saying it had 3 million paying customers in 2016, according to Bloomberg.
Among Tidal owners are high-profile artists, including Beyoncé, Alicia Keys, Coldplay, Madonna, Rihanna and others, according to its website. The service is available in 53 countries and offers more than 60 million songs and 250,000 videos.
Dorsey, meanwhile, has a vision to turn the digital-payment company into a much broader company made up of stand-alone, complementary services. After sitting more than four years on the board of Walt Disney Co., Dorsey is looking into building a similar model for Square, whereby it would own a collection of businesses under one corporate umbrella, Bloomberg reported.
With SQ shares up a stellar 267% year-to-date, Robert W. Baird analyst David Koning this week recommended investors remain “patient” as he views the stock as “a strong and defensible franchise with great secular growth themes in payment.”
Koning expects gross profit to advance by an annual 15%-25% over the next three to five years, “with some margin expansion/use of cash benefit driving EPS growth of 30-50%.”
However, for now, the analyst maintained a Hold rating on the stock with a $245 price target (6.2% upside potential)
Overall, Wall Street analysts are cautiously optimistic on the stock with a Moderate Buy consensus. That’s based on 19 Buys, 10 Holds and 3 Sells. Following the stock’s sharp rally, the average price target of $215.37 implies 6.6% downside risk in the coming 12 months.