On February 23, following strong fourth-quarter 2016 earnings, shares in Square, Inc. (NYSE: SQ) broke above their then-all-time high of $15.91, and have continued to trade above this level since. In December 2016, Investor's Business Daily described the chart of SQ stock forming a "long cup base pattern," with a "buy point" of $16.01. SQ trades near $16.70 today, up $0.29, or 1.77 percent, on heavier-than-average volume.
Though Square is not profitable, for the fourth-quarter of 2016, the financial technology firm reported a per share loss of $0.04, beating the Wall Street analyst consensus for a loss of $0.09, as reported by Yahoo Finance. Following the report, the consensus 2017 and 2018 per share loss estimates for Square were raised significantly, from $0.30 to $0.24 in 2017, and from $0.17 to $0.09 in 2018. Revenue growth of 24.4 percent is forecast for 2017, accelerating to 26.5 percent in 2018.
Will SQ follow FB?
In September 2013, more than a year after Facebook, Inc. (Nasdaq: FB) first offered its stock publicly, the shares broke above their then-high of $45, set the first day of trading, in May 2012.
Since breaking above $45, FB shares have continued to rally, and currently sit near $140, having gained more than 235 percent. One key difference between FB stock and SQ stock, is that Facebook was profitable when its shares cleared its IPO base in September 2015. While Square is debt free, and has impressive revenue growth, as of yet, profitability remains on the horizon.
Another firm that broke out of an IPO base, with shares more than tripling in price, was SolarCity Corporation, which has since been purchased by Tesla, Inc. (Nasdaq: TSLA). Similar to Square, SolarCity had good revenue growth, but was not profitable. Eventually, shares fell back significantly. Different from Square, Wall Street analysts continually revised EPS estimates downward for SolarCity, unlike the online payment processor's recent upward EPS revisions.
Average price target of $17.77 for SQ stock
Square last reported holding $511.39 million in cash. Twenty six firms publish price targets for SQ stock, which range from a low of $10 to a high of $21; the average among the targets is $17.77. Of the firms who publish recommendations for SQ, the average recommendation is 2.1, where 1.0 is described as a "strong buy," and 5.0 is a "sell."
Fidelity Management & Research owned 8.9 million shares of SQ stock, as of December 31, or 5.38 percent of those outstanding. Other major holders included The Vanguard Group, Capitol World Investors, and The Bank of New York Mellon. Square is headquartered in San Francisco, California and employs 1,853 people.