Weak Forecast Puts Square Stock in Post-Earnings Pit

The company issued a dreary current-quarter forecast

by Lillian Currens

Published on May 2, 2019 at 10:05 AM

Despite upbeat first-quarter results, including the e-pay concern's stronger-than-anticipated 11 cents per-share profit and $489 million in revenue, Square Inc (NYSE:SQ) stock has taken a tumble this morning. The stock is down 6.1% at $69.14 in early trading on the firm's worse-than-expected gross payments volumes (GPV) and current-quarter guidance, with several analysts already voicing their concerns over the security. 

Morgan Stanley, for instance, is cautious about Square's long-term growth based on its weak GPV, cutting its target price by $1 to $74. SunTrust Robinson followed suit, slashing its target price to $65 from $75. Mizuho and Cowen, however, lifted their SQ price targets to $87 and $74, respectively. Overall, the consensus 12-month target price of $82.91 is an 18.8% premium to current levels, while half of the 30 covering analysts call SQ a "buy" or better, and the other half leaving a tepid "hold" or worse rating. 

The shares of Square saw a hard rally off their seven-month lows in December, but stalled out at a familiar area of resistance at the $83 level. Just recently, security has run into recent pressure at its 40-day moving average. Plus, today's plummet has the stock trading south of its 120-day trendline, which has acted as a floor since mid-February. 

On the options front, it looks like calls have rarely been more popular. In the last 10 weeks, 2.56 calls have been bought to open for every put on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 91st percentile of its annual range, hinting at a much healthier-than-usual appetite for bullish bets of late. 

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