Square Inc. shares posted their worst two-day plunge in more than three years in the wake of a broad market selloff and as the fallout from the company’s disappointing earnings report continues.
The stock
SQ, -6.82%
was off 7.5% in Monday trading and has dropped nearly 20% over a two-day span.
Square was among tech’s biggest losers in Monday’s session, as stocks fell amid concerns of escalating trade tensions with China. Square shares tend to post big declines when the market sinks, due to caution around high-growth names as well as the company’s exposure to small businesses, which are viewed as vulnerable during economic downturns.
But part of the pessimism about Square’s stock could be spillover from its Thursday-afternoon earnings report, when the company delivered a weak forecast, announced the sale of its Caviar food-delivery business, and showed a deceleration in payment volume.
The “narrative change” brought about by the Caviar sale prompted one bullish analyst to cool a bit on his optimism in a Monday note to clients. Though Guggenheim’s Jeff Cantwell kept his buy rating on the stock, he removed his “best pick” designation and lowered his price target to $80 from $94.
“We view this as Square hitting the reset button on an important part of its business model,” he wrote. “One of the reasons Square bought Caviar back in 2014 was to move ‘beyond payments’ and create sources of competitive differentiation (e.g., offer food delivery in addition to payments) that would help Square better serve its sellers relative to payments-only companies.”
Read: Square teams up with Postmates for delivery partnership
Square said in its investor letter that the Caviar sale gives the company “clarity in how we operate and a clearer purpose and alignment for our planning, investment, and work moving forward.”
One of 2018’s hottest stocks, Square has seen a more muted rise this year. The shares are up 15.6% so far this year, compared with a 13.6% rise for the S&P 500
SPX, -2.98%
.
Source : MTV
