Shares of Square (SQ) - Get Report tumbled Thursday after a top industry analyst likened the coronavirus crisis to "Kryptonite" for the mobile payments platform, which relies heavily on the stricken restaurant and retail sectors.
Square's stock price fell 3.53% to $59.22 a share following the downgrade by Raymond James analyst John Davis, who cut his rating on the stock to underperform from market perform.
In his research note, Davis also slashed his price target to $41 a share, noting that this represents a 33% downside from its current trading price and urging investors to reduce their positions
The Raymond James analyst contends that Square's stock price has not yet caught up with a likely steep decline in the company's bottom line as the coronavirus crisis has deepened over the past few weeks, crippling restaurants and retailers.
Square's stock price is down just 4%, the analyst noted, compared to 15% for the S&P 500.
While Square in a recent March 24 update noted transaction volumes were down 25% year over year during the previous 10 days, the economy since then "has slowed further," Davis wrote.
As a result, Raymond James is now predicting as much as a 60% plunge in Square's GPV exiting March, up from its previous estimate of a stark, 40% decline. The mobile payments company has "significant" small business exposure that "could take a year or more to recover/replace post Covid-19 crisis," Davis wrote.
"Simply put, we believe there is a significant disconnect between the recent performance of the stock ... and the underlying fundamentals of the business," the Raymond James analyst wrote in his note, "Is Covid-19 Square's Kryptonite? We Think So."