BTIG Downgrades Square, Waiting For A Pullback

Shares of Square Inc SQ have surged more than 40 percent since the beginning of March. BTIG’s Mark Palmer downgraded the rating for the company from Buy to Neutral, and removed the price target of $15, saying that shares had already reached the price target.

Analyst Mark Palmer believes that Square is poised for sustained growth and profitability “through both its core mobile payments business and its array of value-added functionality for small businesses.” Despite this, the company’s shares seem to be fairly valued, having gained almost 80 percent since February 8.

“As such, we are moving to the sidelines on SQ and would look to re-engage the name in the event of a pullback,” Palmer wrote.

Concerns Abated

In February, Square’s shares had declined below $9, the price at which the shares sold during in the company’s IPO in November. Palmer mentioned that shares had come under pressure due to several factors, including:

• Investor concerns over competition
• Uncertainty related to the company’s ability to monetize the several small businesses it had built
• Challenges with cost control
• Recession fears, since small businesses are typically hit harder than larger firms by economic downturns

“The solid 4Q15 report that SQ released on March 9, which was highlighted by better-than-expected adjusted revenue and gross payment volume, appears to have allayed some of those concerns,” the BTIG report stated.