Investing.com - Square (NYSE:SQ) surged Tuesday after Raymond James upgraded its outlook on the stock, abandoning its bearish outlook on payments company, citing a more balanced risk-reward profile.
Raymond James upgraded its rating on Square (NYSE:SQ) to market perform from underperform, sending its shares more than 6% higher. The stock is up about 40% this year.
The positive upgrade from the brokerage marked a pivot from its bearish outlook earlier in the year, when it downgraded Square (NYSE:SQ) to underperform, predicting a lack of growth opportunities for the fintech company.
But the headwinds facing the company are now baked into the Square's shares, which trade below its peers.
There are “concerns that the magnitude of the top-line beats would likely wane, and more importantly, the deceleration in second-quarter organic growth could catch some investors by surprise,” Raymond James said. But following the company's “smallest revenue beat in recent memory in 1Q, a 2Q guide that came in below expectations, and a now well-telegraphed margin cadence, the negative catalysts have mostly played out, and the stock has lagged peers."
The brokerage also hailed the company’s business-to-business seller card offering, which was "gaining traction" and could provide enough momentum to exceed expectations in second half of the year.
Raymond James is not alone in its praise for the company’s B2B seller card offering, with JPMorgan (NYSE:JPM) saying last month it believes Square (NYSE:SQ) can keep delivering the growth required to maintain its lofty valuation partly driven by its business debit card.
The card allows businesses to access its sales revenue immediately, without the need to wait for bank transfers.