Square Stock Price Forecast July 2021 – Time to Buy SQ?
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Square (SQ) stock fell 1.6% yesterday and is now down almost 17% from its 52-week highs even as the US stock markets are trading near their record highs. The stock is up only about 6% for the year and is underperforming the S&P 500.
What’s the forecast for Square stock after its 2021 underperformance? Is it a good time to buy SQ stock now?
Square stock technical analysis
Square stock is not looking too bullish on the stock. Square stock is testing its 50-day SMA and is only slightly above the level. The stock could find support at the 50-day SMA but if it fails to hold the line, it could fall towards the 200-day SMA which is currently at $220.52. Also, in continuation with the recent fall in SQ stock, it is approaching a death cross.
The 50-day SMA could fall below the 200-day SMA which could signal a long-term bear market. In a death cross, the 50-day SMA crosses below the 200-day SMA and is seen as a bearish indicator. On the contrary, the 50-day SMA crossing above the 200-day SMA is a bullish sign and is known as a golden cross.
SQ stock looks neutral on the 14-day RSI (relative strength index). The metric is at 48.9 which indicates neither overbought mot oversold positions. RSI values below 30 signal oversold positions while values above 70 are associated with overbought levels.
The 12,26 MACD (moving average convergence divergence) also gives a sell signal. Meanwhile, while SQ stock looks weak technically, it looks strong on fundamentals.
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Recent developments
Square’s founder and CEO Jack Dorsey announced on Twitter that the company will build a new division for decentralized financial services using Bitcoin. He explained the vertical in a series of tweets. According to Dorsey, “Like our new #Bitcoin hardware wallet, we’re going to do this completely in the open. Open roadmap, open development, and open source. @brockm is leading and building this team, and we have some ideas around the initial platform primitives we want to build.”
Square stock forecast
Meanwhile, Wall Street analysts have a split rating on Square stock and its median target price of $281 implies an upside of 19.5% over current prices. Its lowest target price is $175 which is a discount of over 25% while the highest target price of $380 is a premium of 61% over current prices.
Of the 44 analysts polled by CNN Business, 25 rate SQ stock as a buy while 15 rates it as a hold. Four analysts have a sell or equivalent rating on the stock. Earlier this month Moffett Nathanson reiterated its buy rating and $300 target price on Square stock. Last month, DA Davidson had initiated coverage on SQ stock with a buy rating and $275 target price.
Yesterday, Mizuho issued a bullish note on SQ stock and Analyst Dan Dolev sees a once-in-a-lifetime opportunity in the stock.
Mizuho sees massive potential in SQ stock
“We believe Cash App may be en route to becoming the ultimate neo-bank and the money center bank of the future. This could make buying SQ analogous to buying J.P. Morgan in 1871,” he said in his note. He believes that Square has the potential to triple the revenue per user on its Cash App and has a lot of potentials to add to the existing client base.
In May, Rosenblatt reiterated Square as a top pick after the fintech giant posted spectacular earnings. “SQ moves handily to our top-payments pick following a blowout quarter that signals an accelerated path to becoming a leading digital wallet with significant market share. Cash App’s progress monetizing at scale dovetails with a sharp rebound in the Seller business,” it said in its report.
Square earnings surpassed estimates
Square’s revenues adjusted for the bitcoins, rose almost 44% to $1.54 billion. Its adjusted EPS also jumped to $0.41 which was far ahead of the $0.16 that analysts were expecting. Meanwhile, after having more than tripled in 2020, SQ stock has been under pressure this year as investors have pivoted towards value stocks.
There has been a broad-based rerating of growth stocks, especially in the fintech industry. Other growth names in the fintech industry like SOFI and Affirm are also down sharply from their peaks. Both SOFI and Affirm went public in 2021. While SOFI chose the SPAC merger route, Affirm opted for a traditional IPO. Affirm had delayed its IPO from 2020 in a bid to bump up the pricing. The stock almost doubled on the listing despite increased valuations.
SQ stock long term forecast
However, the entire fintech space has come under pressure even as traditional banks are outperforming the markets in 2021 amid the economic recovery and the rise in bond yields. However, in the medium to long term, fintech companies like Square will continue to snatch market share from traditional banks. Fintech and green energy are among the most promising investing theme for the next decade.
Square stock valuation
Square stock looks reasonably valued with an NTM (next-12 months) EV-to-sales multiple of 5.2x and an NTM EV-to-EBITDA multiple of 113x. The multiples might seem higher than established fintech names like PayPal, but they look appropriate considering the strong growth trajectory for Square.
The company is also a play on cryptocurrencies. Square has invested some of its treasury cash in bitcoins and also allows cryptocurrency trading on its platform. Overall, the recent fall in SQ stock looks like a good buying opportunity. Short-term volatility notwithstanding, the stock could deliver strong returns in the long term.
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