Square Stock Nabs Record High After Quarterly Win

The equity already sports a 218.4% lead this year

Digital Content Manager
Nov 6, 2020 at 2:29 PM
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The shares of Square Inc (NYSE: SQ) are up 14% at $199.77 at last check, earlier hitting a record high of $200.67, after the mobile payment name reported third-quarter earnings of $0.34 per share -- significantly better than Wall Street's estimates of $0.16 per share -- as well as a revenue beat. The company attributed the positive results to a 24% profit jump, as the pandemic boosted online spending and transactions on its peer-to-peer payments app. In turn, the equity earned at least 10 price-target hikes, including one from Needham to $230 from $190. 

Digging deeper, Square stock has been carving a channel of higher highs since early June, when the security fully recovered from its March 18, three-year low of $32.33. And while shares had been cooling off prior to today's surge, the supportive 80-day moving was able to contain this brief pullback. Year-to-date, SQ sports a jaw-dropping 218.4% lead. 

SQ 80 Day

Analysts were pessimistic toward Square stock coming into today, leaving plenty of room for upgrades and price-target hikes moving forward. Of the 33 in question, 17 carried a tepid "hold" or worse rating, while 15 carried a "buy" or better. Echoing this is the 12-month consensus target price of $173.72, which is a whopping 12.7% discount to current levels.

And while shorts are already hitting the exits in droves, there is still lots of pessimism left to be unwound, which could also push SQ higher. Short interest is down 6.8% in the last two reporting periods, yet the 26.03 million shares sold short still make up 7.7% of the stock's available float.

A shift in the options pits, which leans pessimistic, could keep the wind at the security's back as well. This is per Square stock's Schaeffer's put/call open interest ratio (SOIR) of 1.26, which stands higher than 75% from the past year. This indicates short-term option traders have rarely been more put-biased.

As of today, that shift seems to be well on its way. So far, 212,000 calls have crossed the tape -- five times what is typically seen at this point, and nearly three times the number of puts traded. The expiring weekly 11/6 200-strike call is the most popular, followed by 195-strike call in the same weekly series, with new positions being opened at both as investors anticipate more gains for SQ by the end of the day.

Lastly, the equity's Schaeffer's Volatility Scorecard (SVS) ranks extremely high at 99 out of 100, meaning SQ has tended to exceed these expectations during the past year -- a boon for options buyers.

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