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Square Stock Could Be the Better Buy Over Shopify

It’s no secret that Square (NASDAQ:SQ) is all about disruption. The fintech specialist upended the payment processing and credit market when it first launched its square readers to small businesses owners. Those readers — and tangential service products — are now standards at mom and pop restaurants, farm stands and boutiques across the country.

Thanks to comprehensive business solutions, Square stock is poised to outperform rival Shopify
Source: Jonathan Weiss /

Because of that entrenched nature, it’s allowed SQ stock to become a big hit with investors. Even with this last summer’s recent hiccups, shares of Square stock are up over 400% since its initial public offering in 2015.

The best part is the disruption could continue. That’s because SQ is moving heavily into e-commerce.

Square is finally putting its Weebly acquisition to real use and rolling out new products to allow small businesses to build out websites and e-commerce stores. If this sounds familiar, it should. SQ is now firmly moving into another tech darling Shopify’s (NASDAQ:SHOP) wheelhouse.

The win is that Square’s product mix could give it the edge over SHOP in the long run. If investors are looking at the two firms, SQ stock could be the better buy.

Square Gets Omnichannel Fever

Square’s original modus operandi was helping smaller merchants move into the digital payment realm. It’s expensive to go to a regular bank, sign-up for a credit card reader and pay processing fees each transaction. Moreover, craftsmen, food-truck owners, and other similar merchants aren’t tethered to a single location. This makes taking a Visa (NYSE:V) card impossible.

However, in matching this need for smaller merchants, Square realized it was missing an important piece of the puzzle. That piece could be found in online and omnichannel sales. Even with smaller businesses, consumers are increasingly becoming fickle. They want their products on their own terms. SQ had already developed some e-commerce products to help integrate its payment processing into mobile apps. But that doesn’t really help the true small business owner expand its web operations.

So, about a year ago, Square got smart and purchased website builder Weebly for $365 million in cash.

At first, that deal was a bit puzzling to investors. But now, Weebly is starting to bear some serious fruit for SQ. The fintech firm has started to unveil some new products with Weebly over the last few months and they could be doozies.

To start with, Weebly makes it easy for a small shop to build out a website and start selling. By using Weebly and integrating Square’s Online Store suite of products, business owners can now not only integrate Square’s in-store point-of-sale (POS) system, but also update inventory in real-time, create shipping labels, pull products for in-store pick-up, and add gift card functionality to their stores. Even better is that SQ’s new products add social media click-throughs and integration for Instagram and soon Pinterest (NASDAQ:PINS) sales.

In the end, Square’s new website tools allow small business owners to bridge the gap between physical and digital storefronts. Simply, merchants can now synchronize their online and offline outlets as one unit.

SQ Takes a Shot at SHOP

As I mentioned earlier, this is a familiar tune. Shopify has seen its star rise as e-commerce growth has pushed more small- and mid-sized businesses onto the web. SHOP basically performs the same function as Weebly and rival Wix (NASDAQ:WIX). Here again, integration of inventory management, payments, data trends, etc. are a hallmark of the SHOP platform.

However, SQ may be able to eke out a better living in this realm thanks to several differences.

For one thing, getting actually paid as a seller may be easier via Square’s new web operations. The issue is that if you already use SQ’s POS on a mobile device at say a craft fair to sell your wares, connecting it to a Shopify-created website is surprisingly difficult.

Shopify charges fees for using a third-party payment gateway including Square. Moreover, getting the rest of SQ’s features onto your Shopify site will cost you a pretty penny via third-party app developers. With Square’s Online Store, it’s all integrated.

Secondly, SQ is running more like a bank these days than just a payment processor. Thanks to its Square Capital arm, getting a small business loan to help fund your business is easy. Moreover, repayment is done through automatic deductions from a seller’s daily card sales on Square’s network.

In addition, products like Square’s Cash App makes it easy to conduct peer-to-peer transactions, while its new debit/banking operations allows merchants to tap the cash through their sales instantly. None of this is available with Shopify.

SQ Stock Is the Better Long-Term Choice

While switching from a Shopify account to Square may not make a ton of sense for entrenched merchants, those starting out will find that SQ is simply the way to go. With Square, small business owners are able to sell in the physical world with its readers, POS and other products, as well as in the digital space. The best part is that it all connects together. This is a powerful tool and something Shopify doesn’t do.

For SQ stock investors, it creates the potential for some serious revenue growth down the road. Already, Square continues to win on this front. This contrasts to SHOP which has now seen 13 consecutive quarters of revenue growth deceleration. My guess is that this will continue as Square starts to seriously eat Shopify’s lunch in e-commerce. And the reason is simply the platform is just easier to navigate and integrate for retailers.

In the end, SQ stock makes a compelling buy based on its new web operations. Further, investors should consider the stock over SHOP for the long haul.

Disclosure: At the time of writing, Aaron Levitt did not hold a position in any stock mentioned. However, he is considering adding a position in SQ.

Article printed from InvestorPlace Media,

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