Shares of point-of-sale payments processor Square (NYSE:SQ) jumped out of the gate and are up 5.9% as of 12:40 p.m. EDT.
Two news items appear to be helping the stock today.
First, StreetInsider.com reports that based on its latest 13F filing with the Securities and Exchange Commission (SEC), Dan Loeb's Third Point hedge fund has started a new position in Square stock, buying 800,000 shares during the quarter that ended on June 30. Investors unable to invest in the hedge fund but trying to at least track and imitate Third Point's strategy may be responding to the news by buying a bit of Square stock themselves.
At the same time, investment bank JPMorgan just came out with a new price target on Square stock, reports TheFly.com. Saying it likes "proven scale players" and calling Square in particular a "digital winner" in the payments and processors sector, JPMorgan raised its price target to $172 per share and reiterated its "outperform" rating on the shares.
Square stock currently trades just over $150 a share after today's jump. Thus, JPMorgan's new target price appears to be promising about a 15% profit to new buyers today. In so doing, JP is breaking from the pack. According to a tally of all analysts forecasting prices for Square currently, S&P Global Market Intelligence is showing that on average, analysts think the stock is slightly over-priced at present and that Square will trade closer to $143 a share a year from now.
Only time will tell whether JPMorgan -- or everyone else -- is right about this one. For the time being, all I can say is that at a valuation of more than 11 times sales and a staggering 218 times earnings, Square is one pricey stock, and it has a lot to prove to justify its current valuation.