Buy Square because the negativity around the stock is about to change, says Wells Fargo

Payments company Square is being overlooked on Wall Street but that’s about to change, according to Wells Fargo.

The firm upgraded Square’s stock to outperform from market perform. Wells Fargo’s target price is unchanged at $80. Square’s stock closed at $58.51 on Wednesday.

“SQ’s fundamentals remain strong, investor sentiment is overly negative and close to inflecting, and valuation is more attractive than it has been for some time,” said Wells Fargo senior analyst Timothy Willi in a note to clients.

Square’s stock has lagged the other payment processors dramatically in the past year. Square is down nearly 40% in the past 12 months, while Visa is up 17%, MasterCard is up 22% and PayPal is up about 16%. Despite the downtrend, Willi said sentiment around Square is overly negative given its strong fundamentals and improving valuation.

“We believe investors are overly negative and most, if not all, concerns are already reflected in SQ’s share price and valuation,” said Willi.

Although Square beat on its top and bottom line when the company reported earnings in August, it missed on the total payments volume, which disappointed investors. Gross payment volume growth declined from the first to second quarter to 25.3% from 26.7%, but Willi noted it was still nearly three times the growth of U.S. card-based payments and “significantly stronger than any of SQ’s peers.”

Willi also said Squares decision to sell food delivery business Caviar was strategic and allows the company to focus more on the payments business.

Shares of Square popped 3.9% on Thursday.

—with reporting from CNBC’s Michael Bloom.

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