Schaeffer's 43rd Anniversary Stock Picks in 2024

Square Stock Eyes Fifth Straight Win After Rare Bull Note

Macquerie believes SQ's CashApp is gaining ground on Venmo

Managing Editor
Nov 26, 2019 at 9:55 AM
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When we last checked in with Square Inc (NYSE:SQ), the payments processor was higher post-earnings despite a flurry of bear notes. Now, almost three weeks later, SQ is up 0.8% to trade at $68.80 today, after Macquerie initiated coverage with an "outperform" rating and $105 price target. The analyst in coverage noted Cash App was gaining ground on rival Venmo in analytics trends.

The new price target represents more than 50% upside to last night's closing perch of $68.25. Square stock is cruising toward its fifth straight win, and is now trading right around its post-earnings bear gap territory from Aug. 5. Should today's results hold, SQ will have toppled its 200-day moving average for the first time on a closing basis since that aforementioned bear gap.

There's a great deal of pessimism surrounding Square that could fuel more short-term upside. Despite the bull note today, 18 of 33 brokerages in coverage still rate it a "hold" or "strong sell." 

The equity is also ripe for a short squeeze. Short interest tapered off in the most recent reporting period, yet the 34.25 million shares sold short accounts for 10.2% of SQ's total available float, or more than four days' worth of pent-up buying power, at the stock's average pace of trading. 

Short-term SQ options can be had for a bargain right now, too, according to the stock's Schaeffer's Volatility Index (SVI) of 32%, which ranks in the 6th percentile of its annual range. In other words, near-term options are pricing in unusually low volatility expectations for the software stock. 

 

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