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Buyout Buzz Boosts Square Stock Ahead of Earnings

The shares are now back above the key 80-day moving average

Apr 27, 2018 at 9:54 AM
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Ahead of its first-quarter earnings report, due out after the close next Wednesday, May 2, Square Inc (NYSE:SQ) said it is buying website-building firm Weebly in a cash-and-stock deal valued at $365 million. The purchase will allow the payment processor to create a platform where small business owners can create websites and online stores. The news is being well-received, too, with SQ stock up 3.7% out of the gate to trade at $48.47.

This positive price action is nothing new for Square stock, though. Year-over-year, the shares have surged roughly 166%, and topped out at a record high of $58.45 on March 21. After hitting this milestone, the equity pulled back amid broader tech headwinds, but found a foothold atop -- and bounced from -- its 120-day moving average, and is now back above its historically bullish 80-day trendline.

There's plenty of fuel to keep today's rally going, especially if Square turns in another well-received quarterly report next week (the stock has had a positive earnings reaction in six of the last eight quarters). For starters, there are nearly 36 million SQ shares dedicated to short interest. This accounts for a healthy 13.6% of the stock's available float, and would take almost four days to cover, at the average pace of trading.

Plus, 13 analysts still maintain "hold" or "strong sell" recommendations, while the average 12-month price target of $49.39 sits just above Square's current price. This leaves the door open for upgrades and/or price-target hikes to draw more buyers to SQ's table.

And those looking to bet on Square with options are in luck, considering the tech stock has consistently rewarded premium buyers over the past year. The equity's Schaeffer's Volatility Scorecard (SVS) reading stands at a lofty 97 out of a possible 100, meaning SQ has tended to make outsized moves over the last 12 months, relative to what the options market has priced in.

 

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