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Home / Business / Jim Cramer weighs whether he wants to buy the Square stock

Jim Cramer weighs whether he wants to buy the Square stock



There is a difference between a broken stock and a destroyed company, and Square falls into the first category, CNBC's Jim Cramer said Wednesday.

The Fantech Company's share, which had been one of the practitioners in the market for several years, has struggled mightily as of late. It has fallen more than 20% since August 1, when it traded at $ 83 a share. It fell below $ 60 on Wednesday.

Still, the host "Mad Money" thinks Square is not a company to shy away from.

"Square's basic elements are healthy, so it's a broken stock, not a ruined company, which means you can absolutely buy this one for weakness," Cramer said. "Worst case? Something else is going on and the stock is getting even cheaper."

Square has fallen out of favor with investors after successive quarters in beating earnings and sales expectations, yet providing conservative guidance for the coming quarter and leaving the full year ̵

1; Expected year unchanged, Cramer said.

"Money managers were sick and tired of good quarters and then conservative guidance, which is why the stock fell 14% the following day and just kept falling," Cramer said.

Wall Street has also seen Square more skeptical since CFO Sarah Friar stepped down to become CEO of Nextdoor, Cramer said. Friar announced the announcement on October 10, and in January Amrita Ahuja left Activision-Blizzard to replace her.

"The stock was lit up when Sarah left. Wall Street trusted her, and that's what mattered," Cramer said. "I will not disrespect her successor … but analysts and institutional investors have become much more skeptical since Friar left."

While Cramer noted that many other fintech companies have stepped out of style lately, the slower recession fears are causing investors to return to established economies, Square's problems began before that, he said.

"I think this is a management problem, but it is really a cosmetic management problem, so don't be afraid," he said. Squares CEO is Jack Dorsey, who is also CEO of Twitter.

Cramer said he used to call him a "part-time boss," but it didn't matter as long as Friar was there "and kept her eyes on the award."

But Square's core business is one that Cramer looks upon as promising long term. Square built a large payment network by offering small credit card readers that could make smartphones a point of sale terminal, Cramer noted.

And it has used the network and data it has gathered from it to build a fast-growing money-lending operation called Square Capital, Cramer said.

"No bank has that kind of insight into the borrowers," Cramer said. "And since Square controls the payment system, if you borrow from them, they can only take interest payments straight out of your receipts."

In addition, Square runs a peer-to-peer payment app called the Cash app and recently sold its food delivery service, Caviar, to DoorDash for $ 410 million, a move that Cramer complimented.

"I think they got a great price, kind of incredible," Cramer said. "Believe me, you won't be in the online delivery business. Margins are cut in the throat," he added.

This is why despite the recent struggles a stock has been worth lately, Cramer said. [19659002] "Square used to be extremely expensive, but now it sells for 8.5 times next year's sales and 53 times next year's earnings estimates," he said. "Given that the company has a growth rate of 46% in the long term, I call it reasonable in relation to the growth rate."


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