Square Pops On Citi Upgrade, But Market Cycles Point Lower

Square Inc SQ traded 4 percent higher on Tuesday morning, after Citigroup upgraded the mobile payment company from neutral to a Buy rating. However, our analysis of the stock’s market cycles indicate that downside risk will persist before it is able to move higher again.

Analyst Peter Christiansen recommended that his clients buy Square, raising his price target from $67 to $90, which represents a 20 percent premium from Monday's closing price. Noting the strength of Square’s ecosystem and user growth, Christiansen points out that the company's recent weakness is largely due to the departure of former-CFO, Sarah Friar, who took a position as CEO of startup, Nextdoor.  

"Given Square's category leadership and high profile, we believe it is well-suited to attract a talented CFO to help lead the company in its next phase," explained Christiansen.

Looking at the the market cycles for Square, we believe Citi is wrong with respect to the timing of its call. Our view is that the likely scenario is for more downside risk, as the stock is still in the declining phase of its current cycle. As such, we see the stock taking a trip back to $63 by year end.

Square Stock Chart With Weekly Bars

Related Links:

Citi Turns Bullish On Square, Says Payments Company Underappreciated By Street

Here's What's At Stake For Your Investments In The 2018 Midterms