Shares of Square Inc. SQ, +6.96% are down 5.3% in premarket trading Thursday after the company reported better-than-expected third-quarter results but delivered a lighter-than-anticipated fourth-quarter outlook. Susquehanna Financial Group analyst Jamie Friedman cut his rating on the stock to neutral from positive after the report. “Square is challenging the payments status quo, taking about 10 billion of cumulative revenue share from incumbent merchant acquirers, [independent sales organizations] and [independent software vendors],” he wrote. “But creation requires investment; valuation exceeds our price target [of $77]; and we have no CFO.” He recommends that investors consider First Data Corp. FDC, +4.64% shares, saying that the company’s Clover product “is generally performing as well as Square’s payments products.” Friedman argues that while First Data has some challenges in other parts of its businesses, “the FDC discount to Square seems compelling.” Square shares have gained 125% over the past 12 months, as of Wednesday’s close, while the S&P 500 SPX, +2.12% has gained 8.5%.
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