During last Thursday’s trading, I fully expected all my recommended ideas to perform poorly. With the coronavirus from China now just inches away from becoming a pandemic, the crisis has sucked much of the wind out of investors. So, I was surprised to see Square (NYSE:SQ) holding up well. In fact, on Thursday, SQ stock rose 3.6%.
In 2020, its shares are up 30%. That’s in sharp contrast to the benchmark S&P 500 index, which is down more than 6%. So what has made SQ stock – a high-growth investment – stand out in this malaise?
This is just speculation, but it may provide some insight into Square’s success. SQ stock has soared on the underlying company’s effectiveness in leveling the business playing field. With Square’s myriad payment and operational platforms, small businesses can effectively compete with their larger rivals.
Square enables small firms to accept all types of payments, helping entrepreneurs better align themselves with the cashless society. And handling cash – both paper and coins – can spread bacteria and viruses. Indeed, the problem is serious enough that China started washing its physical currency in a bid to stymie coronavirus transmissions.
Further, Square’s platform includes an online merchant network, encouraging business owners to enter the digital realm. Logically, that will help stem the tide of coronavirus.
That said, I’d wait a bit before diving into SQ stock.
Coronavirus Is Too Much of a Risk Factor to Ignore
If you’ve followed my work on InvestorPlace, you’ll know that I’ve been consistently bullish on SQ stock. As a business ecosystem and a digital payments and banking alternative, I believe Square will be relevant for the next several years.
However, I must be realistic about the present circumstance. In addition to the S&P 500, the Dow Jones and the tech-centric Nasdaq have tumbled badly. And while Square is up big for the year, its recent trades have been wild. As a result, I don’t expect its shares to tread water for much longer.
According to the Washington Post, California officials are “monitoring 8,400 people who may have been exposed to the coronavirus after traveling to Asia. They join thousands of people across the United States who have been requested to self-isolate or check themselves for coronavirus symptoms this month.” Three Californians have reportedly contracted the virus while in the state.
To me, this is evidence that the coronavirus is already here in force. Thus, we should ditch the term epidemic and call the virus for what it is: a pandemic.
One of the biggest concerns regarding the coronavirus is its asymptomatic transmission. According to the New York Times, a 20-year old woman from Wuhan (the virus’ epicenter) infected five members of a family who had hosted her during a visit. However, the woman never got sick herself.
Even more worrisome, Italy went from having no cases to 1,694 with 34 deaths. From what I understand, Italian authorities are still searching for “patient zero,” the individual responsible for spreading the disease in that country.
SQ Stock Is Cheap, But Probably Not Now
Let me reiterate: in the bigger picture, I’m very bullish on SQ stock. How could I not be? The company represents viable competition against traditional financial institutions like Visa (NYSE:V) and Bank of America (NYSE:BAC). It also offers an alternative to PayPal’s (NASDAQ:PYPL) payment solutions.
No health outbreak will change my mind about Square’s relevancy. But in the near to intermediate term, it’s not about what I think. Rather, it’s what the collective markets think. Currently, risk-on and growth names are highly volatile, while their nearer term outlook is uncertain.
Nevertheless, if you’ve got the discipline and patience, the weakness of Square stock will ultimately be an opportunity.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.