Square Stock Inches Higher, Despite Analyst Drubbing

Gains are limited by a round of price-target cuts

by Lillian Currens

Published on Nov 7, 2019 at 9:54 AM

Payments concern Square Inc (NYSE:SQ) is inching higher this morning, following its third-quarter earnings release. The firm posted earnings of 25 cents per share on revenue of $602.22 million, which both beat estimates. The firm benefited from strength from its Cash App, where revenue more than doubled. Analysts, however, aren't impressed.

Specifically, five in coverage have slashed their price targets, including J.P. Morgan Securities, which cut its estimate to $75 from $87, stating that Square's focus on investments in the next year could weight on near-term margin expansion. Analyst sentiment has been split on the equity. Prior to today, 17 in coverage said Square was a "buy" or better, while 18 said "hold" or worse. 

Sentiment among the options pits has been much more bullish. During the last 10 weeks, 2.61 calls have been bought for every put at the the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 90th percentile of its annual range, too, indicating a much healthier than usual appetite for calls over puts of late. 

The stock's Schaeffer's open interest ratio (SOIR) of 1.32 tells a different story. This number stands higher than 79% of all other readings from the past year, which points to unusual open interest for put options expiring within the next three months.

Taking a look at the charts, the shares of SQ have been moving sideways since suffering a massive post-earnings bear gap in early August. A late-September pullback was caught by the equity's $56 region. Lately, the shares have been bouncing along the $60 level -- testing their footing atop the 40-day moving average in recent weeks. At last check, SQ is up 0.5% at $61.65. 

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