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Square stock (SQ) extends momentum despite lofty valuations

Square stock (SQ) extends momentum despite lofty valuations

Square (NYSE: SQ) stock price soared 160% year to date as fintech company has aggressively been capitalizing on consumers and businesses shift towards online payment systems. Wall Street analyst believes that the rally was only supported by robust Cash App adoption. The Cash App revenue doubled year over year to $325 million during the second quarter.

The shares of fintech company hit an all-time high of $167 after reports suggested that Cash App volume grew sharply in August despite easing social distancing policies. YipitData shows that Cash App volumes jumped above 150% in early August compared to the past year period.

Its second-quarter revenue came in at $1.92 billion, up sharply from last year’s revenue of $1.17 billion, and exceeding analysts’ estimates for $1.13B.

Despite robust financial performance and strong volumes in August, Square stock price has limited upside potential in the days to come. This is because of the lofty stock price valuation. Its shares are currently trading around 250 times to earnings and 37 times to book ratio.

Cowen analyst George Mihalos downgraded its stock ratings to Market Perform from Outperform due to the massive share price rally in the past few months. Evercore ISI analyst Rayna Kumar has provided a price target of $131.

SQ Square, Inc. daily Stock Chart
Square stock performance. Finviz chart

Square appears in a strong cash position to invest in growth opportunities. It ended the second quarter with $3.7 billion in available liquidity. The company looks optimistic over the future fundamentals and consumers shift towards online payments.

“We believe that our purpose of economic empowerment, which is rooted in equality, continues to be more important than ever. Access to financial services has historically been reserved for those with privilege. With both our Cash App and Seller ecosystems, we strive to help broaden access to the tools and services consumers and business owners need to thrive,” the CEO said in an earnings call.

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Siraj is a finance writer based in Saudi Arabia with a strong understanding of and passion for the stock market, cryptocurrency, economics, and finance. He has worked for international clients for many years on several projects related to the stock market, equity research, accounting, and finance. Siraj is a published financial analyst on some of the largest finance websites.