Square Inc (NYSE:SQ)’s Stock Break Out Explained

Square Inc (NYSE:SQ)

How did Square Inc (NYSE:SQ) manage to hold on to its Wednesday gains and scale higher to a new 52-week peak on Thursday? The answer can now be provided. The company’s 4Q16 beat expectations and most analysts who have reviewed the results think the company is moving toward more growth.

Shares of Square settled at $17.15 on Thursday, after gaining more than 14%. Earlier, the stock rose to a new 52-week high of $17.75. Square is up more than 25% year-to-date, and has gained more than 72% over the last one year.

Q$ 2016 top expectations

Square Inc (NYSE:SQ) generated revenue of $452 million, up 21% year-over-year. EPS loss of $0.04 narrowed significantly from EPS loss of $0.34 a year earlier. Both the top and bottom line figures beat the consensus estimates that called for EPS loss of $0.09 and revenue of $450 million.

Square’s gains in the quarter were supported by robust growth in the company’s merchant payment processing service. The company processed nearly $50 billion in payments on behalf of merchants, up 39% compared to a similar quarter a year earlier. Square takes a 2.75% cut in payments it processes. The topline growth was also supported by success in newer businesses such as business credit line Square Capital. The company extended $798 million in business loans in 2016.

Upbeat outlook

On top of strong quarterly results for Q4 2016, Square Inc (NYSE:SQ) also issued upbeat guidance for 2017. The company expects revenue of $2.15 billion for the year, suggesting nearly 25% growth from the prior year.

To reach its revenue target in 2017, Square intends to introduce its services to all its customers. New products are also expected to drive growth in the coming years.

More growth awaits Square

Several rating firms have weighed in on Square Inc (NYSE:SQ) since the company reported Q4 2016 results on February 22. While the majority of the analysts think that the company’s prospects are bright, at least one feels that Square’s continued loss-making is dangerous for its future.

RBC Capital Markets analysts maintained their OUTPERFORM rating on Square stock, but raised their price target on the stock from $17 to $18. Pacific Crest analysts made a similar move by keeping their OVERWEIGHT rating but hiking their price target to $18 from $17.

Mizuho Securities analysts are a bit more optimistic, reiterating a BUY rating and hiking their price target to $19 from $16. However, SunTrust analysts are more cautious with their recommendation of Square, choosing to maintain a HOLD rating on the stock at a price target of $16 – up from $13.

2/23/2017
Ticker Symbol SQ
Last Price a/o, 4:02PM EST  $                       17.15
Average Volume (mlns) 4.48
Market Cap (blns)  $            5.80
Sales (blns) $1.63
Shares Outstanding (mlns) 338.02
Share Float (mlns) 162.82
Shortable Yes
Optionable Yes
Inside Ownership 1.00%
Short Float 6.35%
Short Interest Ratio 2.31
Quarterly Return 40.34%
YTD Return 25.83%
Year Return 73.41%

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

About the author: Monica Gray has an undergraduate degree in Accounting and an MBA – earned with Honors. She has six years of experience in the financial markets and has been a securities analyst for the past two years.

Author: Monica Gray

Monica has an undergraduate degree in Accounting and an MBA she earned - with Honors. She has six years of experience in the financial markets and has been an analyst for the past two years.

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