As Americans Move Away From Cash, Square Stock Is a Long-Term Buy

One of my favorite stocks is still Square (NYSE:SQ). When I first weighed in on the SQ stock, I called it “one of the most oversold opportunities on the market.”  At the time, it traded at just $56.39.

Square Stock May Be Due for a Cooling Off Period
Source: Jonathan Weiss / Shutterstock.com

Nowadays, it’s up to $150 a share, and shows no signs of cooling off.

With the stock unaware of the word, “down” I strongly believe the Square could rocket to $200 before this crazy year is out.

After all, Square still remains one of the most disruptive stocks in the world, allowing anyone to turn their mobile phones into cash registers.

A Closer Look at SQ Stock

According to a recent 13F SEC filing, Dan Loeb’s Third Point hedge fund took a new position in the SQ stock, picking up 800,000 shares in the third quarter.

In addition, JP Morgan just raised its price target on the Square stock to $172 with an outperform rating. The firm called the company a “digital winner” in the payments and processor markets, too, as noted by Motley Fool contributor Rich Smith.

Even Rosenblatt analyst Kenneth Hill just reiterated a buy on the Square stock. He now has a price target of $181 a share, up from an initial target price of $136 a share.

Hill said that the company was impressed by a strong second-quarter earnings report, pointing out that gross profit performance surpassed their expectations. More than that, he said, the Rosenblatt liked the forward outlook upgrade.

“While the better-than-expected July metrics were a clear positive, the biggest takeaways for us were the Cash App engagement metrics and the emphasis on new investment in the business,” Hill wrote. “We see the surge in investment activity as a way to supercharge the long-term growth trends already in place, given healthy payback and ROI metrics historically.”

Strong Earnings and the Move to Cashless

Square earnings crushed estimates thanks in large part to its Bitcoin business.  EPS came in at 18 cents on sales that soared 64% to $1.92 billion.  Excluding Bitcoin, revenue came in at $1.05 billion.  Meanwhile, analysts were looking for a five-cent loss on sales of $1.13 billion.

In the quarter, Square:

  • Achieved gross profits of $597 million – up 28% year over year
  • Its Cash App gross profit was up 167% year over year to $281 million
  • Its Seller ecosystem generated gross profits of $316 million, down 9% year over year

While its GPV, or gross payment volume fell 15% to $22.8 billion, that was better than the expected decline of 20%.  All on the heels of Square exposure to restaurants and small businesses that were clobbered in the pandemic.

Another big catalyst for the Square stock is the idea of a cashless society.

The Bottom Line on Square Stock

At the moment, nearly a third of consumers want a cashless society, says Houston Chronicle contributor ShaCamree Gowdy.

Plus, according to an online survey from Rapyd, 54 percent of people are worried about touching paper money and coins due to COVID. Another 60 percent said they were moving to cashless and nearly a third want to see cash phased out.

By 2021, global e-commerce could reach $5 trillion. As digital payments continue to grow, SQ stock will benefit thanks to the company’s Cash App processing hardware and software.

Plus, Wedbush analysts argue the pandemic had created big behavioral shifts in consumer behavior, saying consumers won’t go back to physical store shopping as they did before. “The retail landscape will look dramatically different in the coming years.”

Square still remains one of the most disruptive stocks in the world.  With sizable growth prospects, solid earnings growth, Bitcoin, the potential for a cashless society, and plenty of bullish analysts, it’s tough to argue against further upside.

Ian Cooper, an InvestorPlace.com contributor, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2020/08/move-from-cash-sq-stock-long-term-buy/.

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