Debate: Buy or Pass on Square, Match IPOs? And What About Twitter?

The CNBC 'Fast Money' traders decide whether they should buy or take a pass on the Square and Match IPOs, then discuss Twitter and the Fed.
By Bret Kenwell ,

The S&P 500 ETF (SPY) - Get Report is flat on Thursday, following a 1.65% rally on Wednesday.

But two stocks are making some noise on what would otherwise seem like a quiet day on Wall Street: Square (SQ) - Get Report and Match (MTCH) - Get Report

Both stocks made their trading debut on Thursday and both are doing well, with Square up 46% and Match up 20%. 

On CNBC's "Fast Money Halftime" show, Jon Najarian, co-founder of Optionmonster.com and Trademonster.com, said he would be a buyer of Square, but would prefer to do so at a lower price. The IPO was priced at $9, but quickly shot up to about $13 on Thursday. He said he would be a buyer near $11. He also likes PayPal (PYPL) - Get Report at current levels.

Pete Najarian, co-founder of Optionmonster.com and Trademonster.com, said he's not a buyer of Square due to the company operating in a highly competitive industry, putting its margins into question. He's also not looking to buy Match. 

Joseph Terranova, chief market strategist for Virtus Investment Partners, doesn't want to buy either IPO, saying investors can have very little knowledge about the businesses until the companies have reported several quarters worth of earnings.

This isn't specific to just Square and Match -- it goes for all IPOs, Terranova said. 

Square would have probably been priced higher had shares of Twitter (TWTR) - Get Report been doing better lately, Terranova said, noting that Jack Dorsey is the CEO for both companies. 

This of course raises the next question: should investors buy Twitter?

Pete Najarian said investors should hold off for a while, at least for a few quarters, to see if the company is turning things around. Twitter needs to grow its monthly active users to get the stock moving higher again, he said. Remember, he cautioned, that Jack Dorsey was just named the CEO of Twitter, so he'll need some time. Change doesn't happen overnight. 

Terranova agreed on waiting to buy Twitter, adding that the company hasn't given investors a concrete reason to buy the stock yet. The numbers aren't exciting and the profitability isn't accelerating, Terranova said. Wait to see if the situation improves, he advised. 

The conversation turned to the broader markets, as investors position themselves ahead of a potential Fed rate hike next month.

Bonnie Baha, director of the global developed credit team at DoubleLine Capital, said investors are already pricing in a rate hike, but she questioned whether that's the right move by the Fed. It's debatable whether the economy can handle higher rates, she said, especially with the slowdown in global economies. And although the labor reports have looked strong on the surface, she said the quality of the jobs are suspect. 

Still, Baha said, the Fed has gone out of its way to communicate with investors that this set of rate hikes may not be like ones seen in previous years -- for example, 25 basis points per quarter. The Fed may hike rates and then wait a long while before hiking again. Baha is not a seller of bonds on a rate hike announcement, she said.

Terranova questioned how in the world the Fed would raise rates to 1% to 1.5% by the end of 2016, if it's this difficult to raise by a mere 0.25% right now. Investors should stick with what's working and avoid the laggard sectors, like energy, he added. What does he like? Terranova is buying consumer discretionary, technology and health care stocks, he said.

Pete Najarian is also buying health care and technology stocks, he said. But he also believes financials will continue to rally. If the Fed raises rates, the financial sector will benefit, he thinks. As for the whole market, he thinks it could pull back slightly in that event. 

Jon Najarian added that the Fed's failure to hike rates in December will lead to a pullback in the market, as investors are now preparing for a rate hike to happen.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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