Square Stock Eyes Fifth Straight Win After Rare Bull Note

There's a lot of pessimism around SQ to be unwound

When we last checked in with Square Inc (NYSE:SQ), the payments processor was higher post-earnings despite a flurry of bear notes. Now, almost three weeks later, SQ is up 0.8% to trade at $68.80 today, after Macquerie initiated coverage with an "outperform" rating and $105 price target. The analyst in coverage noted Cash App was gaining ground on rival Venmo in analytics trends.

The new price target represents more than 50% upside to last night's closing perch of $68.25. Square stock is cruising toward its fifth straight win, and is now trading right around its post-earnings bear gap territory from Aug. 5. Should today's results hold, SQ will have toppled its 200-day moving average for the first time on a closing basis since that aforementioned bear gap.

There's a great deal of pessimism surrounding Square that could fuel more short-term upside. Despite the bull note today, 18 of 33 brokerages in coverage still rate it a "hold" or "strong sell."

The equity is also ripe for a short squeeze. Short interest tapered off in the most recent reporting period, yet the 34.25 million shares sold short accounts for 10.2% of SQ's total available float, or more than four days' worth of pent-up buying power, at the stock's average pace of trading.

Short-term SQ options can be had for a bargain right now, too, according to the stock's Schaeffer's Volatility Index (SVI) of 32%, which ranks in the 6th percentile of its annual range. In other words, near-term options are pricing in unusually low volatility expectations for the software stock.