Square’s stock is up 220% this season, but charts indicate trouble

It’s been hip to get Square this year.

Shares of the mobile payment stock have got surged 222 percent in 2017, including 13 percent last week alone following a announcement that it could start testing bitcoin on its app and a major analyst upgrade. Evercore ISI improved Square to outperform on Friday and doubled its price target, citing Square’s “services with strong, omni-channel capabilities.”

Despite the rally, Miller Tabak’s Matt Maley believes the crimson hot tech share will soon cool-down.

“It’s [trading] at a 90 percent high quality to its 200-day moving standard,” Maley said Friday in a “Trading Country” segment of CNBC’s “Power Lunch.” “You look at Facebook and during its initial 2 yrs as a public business, it didn’t reach a premium even half that big.”

Square, led by Twitter CEO Jack Dorsey, celebrated its second anniversary to be public above the weekend with the fill up almost 400 percent from its $9 IPO price.

“It’s getting very stretched, and if you don’t think here is the subsequent Facebook, this stock will probably need to pull back somewhat before it runs any higher,” Maley said. “And I question if it could go any higher from here at least in the near term.”

Tag Tepper, CEO of Strategic Wealth Partners, also warns against Square’s huge valuation and what he perceives seeing that weakness within their business model.

“Square has a good history of losing profits, and there’s just zero clear way to profitability soon,” he said on “Power Lunch.” “They’ve got good technology, but it’s just not disruptive, and that’s the thing you need in the market.”

In fact, Tepper finds the chance of competition concerning for Square, considering that its fees are huge and its own low profitability could put it in danger of additional big names in the area like PayPal.

“When a competitor does enter their space, how might they manage to lower their costs so they can continue to compete?” Tepper asked. “We’d be staying away from Square at this stage.”

According to data from FactSet, 53 percent of Wall Street analysts covering Square have a buy rating on the stock, though the average price target is $38.56, well below Friday’s levels.

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