Since the company’s initial public offering, Square (NYSE:SQ) blitzkrieged its way to the top of the markets. While shares have come down substantially from its peak, it’s still a winner by almost any measure. For example, on a year-to-date basis, Square stock has gained a very impressive 38%.
I first came across Square’s payment-processing device at an auto-repair shop. My car’s windshield suffered a severe-enough crack that required replacement. Once the work was done, I pulled out my credit card. The shop’s owner took out his Square-armed smartphone and swiped my card. At that moment, I should have invested in Square stock.
Of course, the key to the tech firm’s success is disruption. What I recognized on the day my windshield died was that independent companies can finally compete with the big boys. Prior to Square and its innovative device, small-business owners had to invest in clunky machines tied to often-unfavorable contracts.
With Square came capacity and freedom. It was a simple idea with a small touch, but it worked. The payment-processing device leveled the playing field, essentially forcing businesses to compete on product and service quality, not resource advantages. That alone is enough for most people to consider buying Square stock.
Another reason is the growth of small business in America. Last year, this segment employed nearly 48% of the private-sector workforce. Even more impressive, small businesses number over 30 million.
However, not everything surrounding SQ stock is bullish; namely, the share price. While SQ has skyrocketed since the start of the year, it’s gone flat since mid-February. That worries folks because it appears the tech firm can go either way.
Does Square stock have another catalyst to run on?
Square Stock to Ride Disruption Narrative 2.0
It turns out, SQ has another long-term story that can shake shares out of its present funk. In the first go-around, the company completely overturned the payment-processing sector. Now, management is turning its attention toward the payment platform itself.
Earlier this year, Square announced that it would launch a new debit card aimed at small businesses. While the concept is hardly novel, this particular variation offers unique benefits.
For instance, the Square card allows business owners to immediately spend the funds that they earn through their company’s sales. This way, owners don’t have to wait until the revenues hit their bank accounts, thereby improving cash flow.
Another intriguing factor boosting prospects for the card and SQ stock is the purchase discount. If a card-holder elects to do business with fellow Square merchants, he or she will receive a 2.75% discount. That’s a sizable benefit, especially compared to traditional charge cards’ miserly offerings.
In turn, KeyBanc analyst Josh Beck reiterated his “overweight” rating, as well as his $100 target for Square stock. But Beck also noted that Square’s debit card will perform better than most people expect. I completely agree with him.
Beck addresses the broader narrative, pointing out that roughly 40% of small businesses don’t have a business-specific charge card. In other words, this is a grossly-underserved market that SQ can penetrate and later dominate.
But what I view as critically important are the nuanced benefits. For instance, the Square card allows users to easily separate business and personal expenses. That might not seem like a big deal until tax season. Then, it can really save much frustration.
I suspect that word-of-mouth of all platforms can drive home the conveniences of the Square card. This should eventually translate to a higher price for SQ stock.
Demographics and SQ Stock
If that doesn’t convince you that Square stock is likely to move higher, consider demographic behaviors. Millennials don’t just represent the largest workforce in the U.S. Increasingly, they’ve proven to the most entrepreneurial-minded.
According to one survey, 66% of young Americans aspire to start their own businesses. Not only that, this trend crosses international borders. Oxford University released data that showed that the number of entrepreneurial-focused students increased significantly in recent years.
Naturally, this rising trend bolsters the long-term case for Square stock. But it goes beyond that. You see, Square doesn’t just provide tools in the way that Visa (NYSE:V) or Mastercard (NYSE:MA) does. Instead, it provides simple but effective platforms that encourage business growth.
Again, you might think on the surface that differentiating personal and business expenses is a minor concept. And actually, you’d be right. However, it also mitigates one of the most cumbersome administrative tasks associated with owning a business. That’s the type of smart thinking that separates SQ stock from the rest.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.