Following earnings, is it still hip to be keen on Square (NYSE:SQ)? Let’s take a look at what’s happened off and on the SQ stock price chart in the report’s aftermath to reach a stronger risk-adjusted determination.
Mobile payments innovator Square’s latest quarterly confessional has come and gone. And with shares largely where they were in front of the report after a decent bout of price volatility, suffice it to say SQ stock still has its share of bulls and bears. But despite investors proving indecisive, my view is that Square stock unequivocally continues to impress.
For its third-quarter confessional, SQ stock offered growth-backed and better-than-expected revenues of $602 million. Sales beat consensus views of $596.4 million, increased by 40% year-over-year and were supported by solid growth in the company’s Square Cash consumer app and bitcoin transactions. Square stock’s earnings also looked smart. Profits of 25 cents per share jumped more than 90% from 2018 and easily topped Street forecasts of 20 cents.
Looking ahead, there is some controversy. The Square story continues to shape up, with management expecting fiscal 2020 revenue and gross profit growth in the low 30% range. The forecast puts SQ stock in a league of its own compared to peer PayPal (NASDAQ:PYPL) or credit card giant Visa (NYSE:V). But guidance is below analyst views.
As well, reduced EBITDA margins of 18%, which are flat with 2019 due to higher investment spending, was a concern for some on Wall Street like Instinet’s Bill Carcache. At the same time InvestorPlace’s Vince Martin is simply concerned guidance isn’t enough to offset SQ stock’s market premium in a more risk-averse environment.
Bottom line, SQ stock is obviously not pleasing everyone, despite overall solid earnings and a report which builds the case that Square stock can sustain strong growth at scale. As well, it goes without saying there’s going to be the same kind of disagreement on the SQ price chart where bulls and bears battle it out.
Square Stock Monthly Price Chart
Three sessions into the post-report period, it’s our technical interpretation that the Square chart remains a constructive one.
On the monthly view, we can see Square stock is stationed near the high of September’s bottoming hammer pattern. Our view is this candlestick is a higher-low pivot within a year-long bullish “W” or double-bottom formation. What’s more, the pattern has formed on a successful test of key zone support and stochastics are just now crossing over in oversold territory.
In total, the technical situation offers bullish investors the opportunity to buy SQ stock at advantageous prices with the expectation shares will climb from here and eventually break out to fresh all-time-highs in 2020.
SQ Stock Strategy
My advice is to simply buy SQ stock today. For a straight-up long stock position, a stop beneath $57 looks like sufficient exposure off and on the price chart. And for other like-minded bulls focused on the long game, an option-based collar is a favored strategy to position for success.
Investment accounts under Christopher Tyler’s management own positions in Square (SQ) stock and its derivatives, but no other securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.
