Its time to talk about one of the technology high flyers of the year. Here is the breakdown of $SQ, otherwise known as Square.
Current Price: $180.25
52/Wk High: $182.24
52/Wk Low: $32.22
Read below for the breakdown!
Square operates a commerce ecosystem that gives the company’s sellers (customers) the ability to start, scale, and run their private businesses.
Squares mobile app allows customers to take on payments for their businesses, dig into sales analytics, and gain access to many more features.
Not only that but Square also offers a cash app called Cash App. The app allows consumers to send and receive payments, as well as invest (reuters.com).
Given that the digital commerce space is only growing, the company has been seeing rapid growth.
Digging into Square’s most recent quarter, the company beat expectations. Square reported a beat, with an EPS of $0.18 versus the analyst’s consensus estimate of $-0.05.
Furthermore, the company delivered on revenue as well and reported Q2 revenues of $1.92 billion, up $750 million from Q2 of last year.
When it comes to growth, Square reported that gross profit increased by 28% YOY, totaling $597 million.
Square also experienced major growth within its Cash App ecosystem, which saw profit growth of 167% YOY.
Secondly, Cash App’s user base continued to grow, and the ecosystem saw over 30 million active transacting customers in June of this year.
Taking a look at the balance sheet, the numbers are not bad. In the most recent quarter Square reported $3.7 billion in liquidity, as well as $3.2 billion in cash (including cash equivalents, restricted cash, and investments). On the downside debt and liabilities continued to increase.
As of Q2 2020 Total Debt sat at $2.226 billion and Total Liabilities increased to $5.886 billion.
Given the mixed numbers, analysts are relatively neutral on Square. Currently, the mean price target sits at a distinguishing $160.80/share, representing a -10.66% downside.
Furthermore, the high price target sits at $225.00/share, representing a 25.01% upside, while the low price target sits at $44.00/share, representing a -75.55% downside.
While the analysts are relatively bearish, the big money is just the opposite. Currently, 75.98% of Square is institutionally owned with top holders including Morgan Stanley Management, The Vanguard Group, and BlackRock Institutional Trust.
When it comes to the charts, the technicals couldn’t be more bullish. Currently, according to the six-month charts, the MACD sits in a range of 7.86 down to 5.43, creating sustainable upward momentum.
The six-month RSI sits at 67.32 and is approaching the common oversold RSI level of 70. Finally, the six-month CCI sits at a high 151.04 and the stock sits just two points off its highs.
It is also important to note that Square currently trades at a $79.9 billion market cap, a price to earnings ratio of 388.75 times, and a price to sales ratio of 13.22 times.
In short, Square is a solid long-term pick in my book. Given the solid growth expectations both in the short and long term, as well as recent profitability, I see no reason the stock drops on a long term basis.
On the otherhand, while the short-term trend is extremely positive, a pullback is probable given Squares huge run in recent weeks, and scaling in or waiting for a pullback is the safer bet for a short to mid-term trade.
Overall, my long-term target for Square is roughly $200/share within the next year, but in the short and mid-term I expect market volatility to control the stock’s direction.
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Disclaimer: This is not direct financial advice, simply opinion based on independent research.