Square Stock Retreats After Worrying Guidance

SQ's lower-than-expected fourth-quarter forecast concerns some analysts

by Patrick Martin

Published on Nov 8, 2018 at 10:20 AM

The shares of Square Inc (NYSE:SQ) are down 8.1% to trade at $75.94 this morning, after the payments company's third-quarter earnings report yielded mixed results. While earnings and revenue exceeded expectations, Square's fourth-quarter profit estimates came in well below Wall Street estimates, prompting concerns about the stock's valuation.

A host of analysts have chimed in with updates, both bullish and bearish. Susquehanna downgraded SQ to "neutral" from "positive," while at least five other brokerages issued price-target hikes, including Canaccord Genuity to $95 from $90. In a note entitled "It's Hip to be Square," the analyst in coverage waxed optimistically on the company's increasing market exposure and improving margins. 

On the charts, SQ has still more than doubled in 2018, and earlier this month bounced off a pair of bullish trendlines. Nevertheless, analysts are generally divided toward the equity. Of the 30 brokerages covering SQ, there is an even split between those that rate it a "buy" or better, and a "hold" or worse. 

And anyone looking to play Square, regardless of direction, may want to consider doing so with options. The stock's Schaeffer's Volatility Scorecard (SVS) reading arrives at 94 (out of a possible 100), meaning SQ has tended to make outsized moves over the past year, relative to what the options market has priced in -- a boon to premium buyers.

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