Square (SQ) Tumbles
After topping $49.56 last week, Square, Inc. (NYSE: SQ) took a big tumble. It fell nearly 22 percent and closed at $38.22 on Friday, Dec. 1. Square reported Q3 results earlier in the month that topped expectations. It earned $0.07 a share on revenue of $257.1 million (up 44.6%). Investors may blame analysts for the stock price dropping.
On Nov. 27, BTIG cut SQ stock to a sell. Analyst Mark Palmer set a $30 price target, citing that the upside is priced in the stock. On Nov 16, Nomura set a more bullish tone, setting a $48 price target, up from $45. Who should investors listen to?
Investors should ultimately look forward to the strong management team at Square. Friar and Dorsey are doing a good job. The stock blow-off looks like it erased the enthusiasm and hype lifting the share price to perfect levels.
Though financial metrics are unfavorable, Square has manageable debt while EPS will grow by ~ 20% this year and by ~76 percent next year.
PayPal (NASDAQ: PYPL) is on a steady upward trend. Though the relative valuation is favorable (P/E is 59X and forward P/E is 33x), PayPal will suit conservative investors. The company has zero debt, although the EPS growth of 15% this year and 21% would explain the lower valuations.