Square Inc stock is trading inside a Bull Flag pattern as analysts at Citigroup raised Square’s price target to $38 from $30 on October 18, 2017. The $38 price target represents 16.9% upside from its current price. Citigroup reiterated its Buy rating on the stock.
Square Inc is a commerce ecosystem. The Company enables its sellers to start, run and grow their businesses. It combines software with hardware to enable sellers to turn mobile devices and computing devices into payments and point-of-sale solutions. You can read more about the company on their website.
Square Inc Catalysts
A catalyst for Square Inc stock is the expansion of their commerce ecosystem into offering bank loans. Square plans to open a brick-and-mortar bank after the success of Square Capital, the platform through which Square offers its clients small-business loans. Square Capital loaned more than $250 million of cash to 40,000 businesses in Q1 2017 but this is just the beginning. The small business loan market is a $14 billion revenue opportunity and Square has only captured about 1.8% of that market. Square Inc is applying for a bank charter in Utah called Square Financial Services, that will expand their offering of loans to small and mid-sized businesses.
Another catalyst for the company is market penetration. There are about 21 million small and mid-sized businesses in the US that generate about $6 trillion in revenue. About $3 trillion of that $6 trillion is collected by debit and credit cards. The gross payment volume across Square’s platform over the last year totaled $56 billion. That means that Square only has about 1.8% of the merchant debit and credit cards market leaving plenty of room for expanding market penetration over the next 10 years.
Another catalyst for Square Inc is the US government forcing businesses to adopt more secure EMV chip readers for credit and debit cards. A whopping 60% of small and mid-sized businesses need help with adopting the new technology. Square provides small and mid-sized businesses with an easy all-in-one solution for their in-store and online sales.
Finally, Caviar is another catalyst for Square. Square offers their restaurant owners the means of adding delivery to their offerings. Caviar picks up orders from restaurants and delivers them to customers. You can read more about Caviar on their website.
Square Inc Stock
SQ is currently showing a bull flag pattern. A bull flag pattern occurs when prices pull back slightly after a strong rise up. This may be a good opportunity for an entry. The large players volume is uptrending nicely and the Twiggs Money Flow confirms that Square Inc stock is being accumulated.
With prices consolidating from the bull flag pattern, it looks like a good entry. There is very little resistance above the current price. There is a support zone below the current price at $32.49, a stop order could be placed below this zone.
Square Inc Review
Square Inc (SQ) Return On Assets of -4.51% is inline with the rest of the industry. The industry average Return On Assets is -1.30%. SQ's Profit Margin of -4.13% is inline with the rest of the industry. The industry average Profit Margin is -3.46%. The Piotroski-F score of SQ is 5. This is a neutral score and indicates average health and profitability for SQ. The profitability ratios for SQ are negative, so there is not much use analyzing them.
SQ reported negative earnings for the last year, which makes the Price/Earnings Ratio negative. Besides the negative Price/Earnings Ratio, also the Forward Price/Earnings Ratio is negative for SQ. No positive earnings are expected for the next year. With a price book ratio of 17.72, SQ is expensive. Compared to an average industry price book ratio of 4.68, SQ is valued more expensive than its industry peers. 90% of the companies listed in the same industry are valued cheaper.
Growth is where SQ shines and why investors are willing to buy the stock at an expensive price. The Earnings Per Share has grown by an impressive 77.28% over the past year. SQ is expected to show a strong growth in Earnings Per Share. In the coming 2 years, the EPS will grow by 80.95% yearly. Looking at the last year, SQ shows a very strong growth in revenue. Revenue has grown by 24.90%. Measured over the past 5 years, SQ shows a very strong growth in revenue. Revenue has been growing by 56.40% on average per year. The EPS growth is stable: in the next 2 years the growth will be about the same than in the last 5 years.
A Current Ratio of 2.30 indicates that SQ has no problem at all paying its short term obligations. SQ is better placed than the average company in its industry to meet its short term obligations. Its Current Ratio is much better than the industry average of 1.72. A Quick Ratio of 2.30 indicates that SQ has no problem at all paying its short term obligations. The Quick Ratio of SQ is much better than the industry average of 1.68. An Altman-Z score of 8.06 indicates that SQ is not in any danger for bankruptcy at the moment. When comparing the Altman-Z score to an average industry Current Ratio of 3.61, SQ is in better financial health than the average industry peer. The Piotroski-F score of SQ is 5. This is a neutral score and indicates average health and profitability for SQ. Compared to an average industry Debt to Equity Ratio of 0.00, SQ is requires more financing than its industry peers. 81% of its industry peers have a better Debt to Equity Ratio.
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