Like most publicly traded companies, digital payments and fintech specialist Square (NYSE:SQ) experienced volatility over fears regarding the coronavirus from China. However, unlike most investments, SQ stock has weathered the storm remarkably well. Since the beginning of the year, shares are up 28%. What is Square doing that appeals to Wall Street despite the sour environment?
For one thing, SQ stock is one of the few names for which the coronavirus is a catalyst. As you know, I’m not big on overly reacting to this outbreak.
Most importantly, the coronavirus is a temporary setback. Once it fades – like all crises do – the markets will again focus on relevant sectors, such as technology and digitalization.
That said, SQ stock makes sense on multiple levels. On the health-related front, mobile payments limit the physical interaction between businesses and consumers. This isn’t just a relevant play on the present epidemic. As you probably guessed, physical cash is full of dirty microorganisms originating from places you don’t want to know about. Further, most one-dollar bills have traces of cocaine.
Put another way, less interaction is always better for containing the coronavirus or anything else.
Beyond the health component, mobile and digital payments are far more convenient. The point about credit cards is that you can carry purchasing power in a compact platform. With mobile payments, that same power is consolidated into a device that you carry everywhere.
It’s really the wave of the future, which is why I’m bullish on SQ stock.
Cashless Future Green Lights SQ Stock
As with any new technology, skepticism initially abounds. That’s the case from both the perspective of the business owner and the consumer. However, Square’s intuitive business ecosystem, along with societal and demographic trends, suggest that SQ will rise among the elite players in the cashless future.
In a survey by Statista, many respondents indicated that they’re interested in mobile payments. However, the top-two motivating factors to initiate such transactions are guaranteed protections against cyberattacks and safety features involving smartphone theft.
Of course, these are reasonable desires. Unfortunately, as technology rises, so too does the opportunity for bad actors to advantage innovations for nefarious purposes. According to one estimate, cybercrime can cost the global economy $6 trillion by next year. Moreover, cyber breaches cause untold damage to corporate brands and reputations.
However, recent data demonstrates that people are willing to set aside such fears. In last year’s record holiday sales, one critical fact stood out: mobile payments. For Black Friday, smartphone transactions accounted for $2.9 billion in value. This figure was up nearly 16% from the year-ago period.
Since people are becoming less apprehensive about mobile shopping, this bodes well for SQ stock. After all, why bother carrying a clunky wallet when you can just whip out your phone?
And this convenience will translate to greater adoption among businesses. I’d wager a bet that those who are pensive about smartphone transactions are from the older generations. However, for young millennials and Generation Z, they’ve grown up knowing nothing other than digitalization.
Thus, imposing physical cash payments on these burgeoning consumers is for many of them a weird, foreign concept. Fortunately, Square’s business ecosystem facilitates easy cashless adoption, even for traditionalist entrepreneurs. It’s the core reason why the company has successfully disrupted the broader payments space.
Square’s Bitcoin Bet Paying Off
Perhaps the most important reason to invest in SQ stock, though, is the underlying company’s visionary leadership. One has to admire Square CEO Jack Dorsey for heading both the fintech firm and social media platform Twitter (NYSE:TWTR). But I like him more for sticking to his guns regarding cryptocurrencies.
Although derided by many analysts, Dorsey was an early proponent of bitcoin and the concept of virtual currencies. In his view, these payments represented the future because they were aligned with generational engagement trends. Now, that advocacy is paying off.
In the final calendar quarter of 2019, Square’s bitcoin revenue amounted to $178 million, with gross profits of $3 million. It’s a remarkable transition from just a year earlier.
The beauty of Square’s cryptocurrency business isn’t about the day-to-day price swings. Rather, the company opened doors to discovery. Here, the idea is to let the consumer decide what they want. Clearly, they’re gravitating toward this and other cashless options.
From almost every angle, SQ stock is a buy. Should coronavirus fears chop the price, consider it a very viable discount.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.