SunTrust, MoffettNathanson Upgrade Square (SQ) to Buy

Consumer payments company upgraded from neutral.

Payment company Square (SQ) has dropped 24 percent in the past six months, far underperforming the broader information technology space. That’s led to an upgrade in shares from MoffettNathanson, citing the likelihood of financials “grinding higher.”

Square’s sale of its Caviar division, and the larger-than-expected scale of its Cash App outlook also makes the company look like a compelling buy here.

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  • Separately, SunTrust also upgraded Square to a buy rating on the same day.

    SunTrust’s analyst sees the company investing appropriately to address the complex issues that it faces, and also the sale of its Caviar division as a first step in repositioning the company.

    Overall, analysts had a neutral rating on the company before these upgrades.

    Square provides payment and point-of-sale solutions including contactless and chip reading technologies.

    Action to take: With the company’s poor recent performance and with upgrades shifting the overall market view on the stock, shares could move higher in the next few months. Investors should buy shares up to $65.00, with an eye towards taking profits near $75, a price point where shares have previously had a difficult time holding up in the past.

    Traders should look at the January 2020 $70 calls, which can be bought for under $3.75 or $375 per contract. That trade should move higher with shares in the coming months, offering a more leveraged return.