Square Is Fully Valued For Now; Credit Suisse Downgrades

Despite Square Inc (NYSE: SQ)’s impressive run, up 76 percent this year to $24, Credit Suisse analyst Paul Condra thinks it’s about to cool off.

The analyst downgraded Square from Outperform to Neutral, but raised its price target from $20 to $25.

The downgrade is based on the belief that Square is fully valued for the time being at 42 times 2018 EV/EBITDA, and its rising share price has increased dilution potential. The $5 price target raise includes a $2 decrease from share dilution.

Condra attributes the rise in price to generally positive sentiment toward tech stocks, higher conviction on software as a service and excitement over mergers and acquisitions in the sector.

Square will continue to see plenty of potential in the small merchant space for the near term, but Condra wants to see the company pick up a significant large merchant as a client.

Proof that the payment processing platform can perform on a large scale would lessen a concern held by many investors.

The company was trading down slightly in Friday’s pre-market session at the mid-$26 handle.

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