Just because it is always good to have a dissenting opinion… it seems to me that the downgrade of SQ is not only natural, but expected. I will admit to not reading the article, but to assume an analyst would have to be similar to The recent true short sellers who attached UBNT and SHOP seems wrong. Even from the reasons given in the recent Saul post, I would say it sounds more like an analyst who is saying that SQ has gotten a little ahead of itself.
And I know I’ll get taken to the woodshed here, but in my opinion, it is a little hard to even argue with that statement. Saul, you claim that Bitcoin is not part of anyone’s thesis, and you may be correct, but the fact is the few days following the announcement of the bitcoin feature the stock went up like crazy, my memory wants to say more than $10 over a few days. To think that part of that rise was due to the bitcoin thesis seems pretty clear. Even if it is not financially significant.
I could go on, but I think my point is clear. This is a stock that went from $31 to close to $50 since the first of October ( and had risen very well for the last year). For an analyst to come out and say that perhaps now is not the best time to be buying SQ doesn’t sound crazy to me.
Do you want to sell? Probably not, if you believe in the underlying story. Does it seem like it has gotten a little ahead of itself, maybe (probably?)… certainly having that belief does not make you a closet short seller with evil intentions.
Dissenting opinions are a fact of life in the investing business. They don’t always mean that the dissenter is crazy, or even wrong! Just another opinion in the wilderness, and when a stock has been on a rocket sled, a simple dissenting opinion can cause a lot of damage.
Good luck all, I don’t own SQ, wish I had bought it a while ago. Perhaps I might buy a little in the near future if it falls much further. I do like the company and the space.
Owner of PYPL, MA and interested SQ follower.
This is a stock that went from $31 to close to $50 since the first of October (and had risen very well for the last year). For an analyst to come out and say that perhaps now is not the best time to be buying SQ doesn’t sound crazy to me.
Hi Randy, It’s good to have a dissenting opinion, and of course you are right that Square was getting a bit ahead of itself, and as I wrote in my end of the month summary, I trimmed a tiny bit a week ago at $45.50 and $47.00 because it was becoming too large a part of my portfolio (approaching 14%).
If Parker had merely said that Square has been going straight up and is due for a rest, I’d have had no argument, but when he wrote things like:
We also believe SQ has been identified by investors as a company that would benefit from the enactment of U.S. tax reform given the boost such legislation could provide to small businesses. The flip side is that if tax reform efforts stall, the stock could be particularly vulnerable as the market upsurge driven in part by hopes for such reform unwinds, in our view.
and made “Estimates” that sales would be up 2% and EBITDA would be up 6% sequentially in the December quarter to justified his “overvalued” thesis, his arguments looked so like he was searching for straws that it just looked to me like a short attack.
… that it just looked to me like a short attack.
I don’t think this is a short attack, just the usual approach of the big boys looking to create a good entry point. A real short attack always includes accusations or at least implications of malfeasance or outright criminality of management. I didn’t see that here.
Interesting observation. I read the report and you are correct. While the report seems to extensively employ numerical analysis based on questionable premises, I did not see any allusion to inappropriate management behavior.
Yet, I can’t help but to consider it a concerted effort to drive the stock price down. If it looks like a short attack and acts like a short attack chances are pretty good it is one.
I do admit that the predicted sales up 2% seems very low and in fact if for some reason they hit that (and I am not in any way predicting 2%), I would certainly be concerned with the markets reaction… yikes…
In any event, it did appear that he was looking for arguments that agreed with his thesis. definitely not an impressive investigation, even if he isn’t trying to buy back his shorted shares…