Options Bulls Blast Square Stock After Upgrade

Year-over-year, SQ remains down 46%

Digital Content Manager
Feb 28, 2022 at 10:29 AM
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Block Inc (NYSE:SQ) is up 3.9% at $124.47 this morning, after the digital payments name earned an upgrade from BMO to "outperform" from "market perform." The analyst in question noted the company's organic revenue growth potential, and added it expects a positive earnings surprise for the Cash App and Afterpay parent, formerly known as Square. Meanwhile, both D.A. Davidson and KBW cut their price targets, to $175 and $180, respectively.

Analysts were overwhelmingly bullish towards the equity coming into today, with 24 of the 31 in coverage calling it a "buy" or better, while seven rated it a tepid "hold." Plus, the 12-month consensus target price of $194.91 is a 58.1% premium to current levels.

Meanwhile, short sellers have piled on Block stock. In fact, short interest added 21.6% in the most recent reporting period, and the 51.01 million shares sold short now account for 10.1% of the equity's available float, or nearly one week's worth of pent-up buying power. 

Drilling down to today's options activity, 26,000 calls have crossed the tape, which is double the volume that is typically seen at this point. Most popular is the 3/4 125-strike call, where new positions are being opened, followed by the 130-strike call in the same weekly series.

What's more, the security's Schaeffer's Volatility Scorecard (SVS) sits at 88 out of 100. This indicates SQ exceeded option traders' volatility expectations during the past year -- a boon for options buyers.

Digging deeper, Square stock is bouncing back from Feb. 24, roughly two-year low of $96.13. Today's pop has the shares eyeing their first close above resistance at the 20-day moving average, which pressured the shares lower since early November. Year-over-year, SQ is still down 46%.


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