BTIG Downgrades Square To Sell: 'No Clear Path To Profitability In The Near Future'

Square Inc SQ stock is up an incredible 240 percent in 2017, but another analyst now says now is the time for traders to take their profits to the bank.

The Analyst

BTIG analyst Mark Palmer downgraded Square from Neutral to Sell and set a $30 price target for the stock.

The Thesis

Palmer said Square stock has come too far too fast and is due for a significant pullback. After assigning a 20 times multiple on BTIG’s fiscal 2020 earnings estimate, Palmer sees meaningful downside in Square’s share price.

“While we have been impressed by the growth that SQ has generated during the past few quarters in terms of both adjusted revenue and gross payment volume (GPV), we believe substantial growth is already baked into its share price and that it is difficult to justify its valuation at 28.1x FY20E adjusted EBITDA,” he wrote on Monday.

Palmer also said Square choosing to bring bitcoin trading capabilities to the Square Cash adds unnecessary risk for investors due to Bitcoin’s extreme volatility.

Palmer isn’t the first person to question Square’s valuation in recent weeks. Earlier this month, Strategic Wealth Partners CEO Mark Tepper said Square’s fundamental picture doesn’t support its extreme run.

“Square has a good track record of losing money, and there's just no clear path to profitability in the near future,” Tepper said on CNBC.

He said that unless investors see Square as the next Facebook, Inc. FB, they should expect a meaningful pullback ahead.

Price Action

Square opened Monday’s session down more than 6.5 percent and traded around $46.54 at time of publication.

Related Links:

Cash In On Square's Run, Analyst Says

Do You Use Square Cash? You Might Be Able To Buy And Sell Bitcoin

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