Is it ossible to do a squash and stretch effect using iTween on GUI Buttons?

I'm trying to make a menu button where the user clicks on the button, it drops down and when it reaches the target position, it will end being squashed and stretched like a ball animation.

Yes.

You would need to use GUIUtility.ScaleAroundPivot() and 2 iTween.ValueTo() methods (one to ease out and one to ease in).