Square Stock Set for Record High After Pre-Earnings Bull Note

The door is open for more upbeat analyst attention

by Patrick Martin

Published on Jul 24, 2018 at 9:18 AM

For the second time in a week, Square Inc (NYSE:SQ) received some bullish brokerage attention. This time, it was Deutsche Bank that chimed in with a price-target hike to $78 from $57, with the analyst in coverage predicting upbeat revenue results ahead of the company's second-quarter earnings report after the close on Wednesday, Aug. 1.

In response, Square stock is up 1.5% in electronic trading, on track for a fresh record high. Another win today would make it four in a row for SQ, which, prior to today, had more than doubled year-to-date. More recently, the shares have relied on their ascending 30-day moving average as support since late April.

Despite this impressive price action, many analysts remain on the sidelines. Of the 29 brokerages covering SQ, 59% rate it a "hold" or "strong sell." Furthermore, the security's average 12-month price target of $63.21 is a 13% discount to yesterday's close at $71.60. This indicates there is ample room aboard the bullish bandwagon, and more bull notes could provide tailwinds for the mobile payments processor. 

A short squeeze could also keep the wind at SQ's back, considering the 34.25 million shares sold short is at its highest point since mid-April. This represents nearly 13% of the equity's total available float, and more than three days of pent-up buying power.

Those wanting to bet on SQ with options are in luck, considering the stock has consistently rewarded premium buyers over the past year. This is based on its elevated Schaeffer's Volatility Scorecard (SVS) reading of 91 (out of a possible 100), which indicates the equity has tended to make outsized moves compared to what the options market was expecting.

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