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Square (SQ) Gains As Market Dips: What You Should Know

Zacks Equity Research

Square (SQ) closed at $61.83 in the latest trading session, marking a +1.42% move from the prior day. This change outpaced the S&P 500's 0.05% loss on the day. At the same time, the Dow added 0.17%, and the tech-heavy Nasdaq lost 0.01%.

Prior to today's trading, shares of the mobile payments services provider had gained 16.36% over the past month. This has lagged the Computer and Technology sector's gain of 21.05% and the S&P 500's gain of 21.82% in that time.

Wall Street will be looking for positivity from SQ as it approaches its next earnings report date. This is expected to be May 6, 2020. In that report, analysts expect SQ to post earnings of $0.13 per share. This would mark year-over-year growth of 18.18%. Our most recent consensus estimate is calling for quarterly revenue of $1.30 billion, up 35.85% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $0.54 per share and revenue of $4.95 billion. These totals would mark changes of -32.5% and +5.12%, respectively, from last year.

It is also important to note the recent changes to analyst estimates for SQ. These revisions typically reflect the latest short-term business trends, which can change frequently. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 802.27% lower. SQ is currently sporting a Zacks Rank of #3 (Hold).

Investors should also note SQ's current valuation metrics, including its Forward P/E ratio of 113.06. Its industry sports an average Forward P/E of 42.32, so we one might conclude that SQ is trading at a premium comparatively.

It is also worth noting that SQ currently has a PEG ratio of 4.69. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Internet - Software industry currently had an average PEG ratio of 2.5 as of yesterday's close.

The Internet - Software industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 56, which puts it in the top 22% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow SQ in the coming trading sessions, be sure to utilize Zacks.com.


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