Increasing E-Commerce Activity Makes Square a Winner

Payment solutions company Square (NYSE:SQ) has benefited from the surge in e-commerce activity in 2020. As a result, SQ stock is among those that have rebounded sharply since the onset of Covid-19.

Square, Inc. (SQ) logo seen displayed on smart phone. Square, Inc. is a financial services, merchant services aggregator, and mobile payment company
Source: IgorGolovniov / Shutterstock.com

You might have seen Square payment terminals at shops and restaurants. That’s the best-known way the company generates revenue.

However, Square also makes money from its well-known Cash App, which is designed to facilitate the quick and easy exchange of money between people (and sometimes businesses).

Then there’s Square Capital. This is a service providing loans to businesses ranging from $300 to $100,000. So if you thought that Square’s business model was restricted to payment processing, think again.

 

All of Square’s services lean heavily on the migration towards e-commerce. As long as that trend continues, it’s hard to imagine anything getting in the way of the SQ stock’s powerful upward momentum.

SQ Stock at a Glance

Until September 2018, SQ stock holders enjoyed a steady upward march in share price. But stocks can’t keep climbing indefinitely.

From late 2018 to early 2020, the bulls just couldn’t push the SQ stock price above $80 and keep it there. Because of this, SQ was frustratingly range-bound over that time.

Then Covid-19 happened, crashing SQ stock alongside most of the stock market. The subsequent resurrection from the low of $32.33 however, was impressive. In August, the stock touched a 52-week high of $170.61.

A pullback commenced during the first couple of weeks of September. But this should be viewed as a natural part of the process. Dips should be expected along the way as investors occasionally take profits in SQ stock.

Making Transactions Easy

We live in a time when convenience is not just desired, but expected. This applies to numerous aspects of life, but particularly financial transactions and the movement of money.

The advent of e-commerce and the expectation of convenience have hurt businesses that refuse to adapt. On the other hand, these trends have only benefited Square’s bottom line.

That’s because Square specializes in making monetary transactions as simple as possible. In 2020, when people wanted a convenient way to accept their unemployment benefits and their financial stimulus checks, Cash App was an obvious choice.

This phenomenon undoubtedly contributed to the Cash App’s success during the second quarter of this year. Believe it or not, the amount of money that was collectively stored via Cash App reached a whopping $1.7 billion during the quarter. That’s 3.5 times greater than what was stored in the Cash App during Q2 of 2019.

A Growth Story

Skeptics might contend that SQ stock price is still too high, even after an early-September pullback. In response to that, I would invite the skeptics to take a hard look at the data, which indicates a pattern of growth for Square.

For instance, the number of monthly active Cash App users exceeded 30 million in June. Moreover, Square’s net revenues increased by 64% during 2020’s second quarter.

Again, digital trends in the marketplace are contributing factors to Square’s outstanding fiscal stats. Square made a savvy move when the company expanded its business focus beyond point-of-sale payments and into online payments processing.

Reportedly, analysts at Bernstein Research have estimated that investors are pricing the value of the Cash App at up to $40 billion. Suffice it to say that the Cash App has made monumental strides since its humble introduction to the world in 2013.

The Takeaway

The naysayers will always find reasons to sell SQ stock. Yet their reasons are flimsy and in all likelihood, they’re only missing out on the chance to profit from Square’s relentless growth in a time when e-commerce dominates.

Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.


Article printed from InvestorPlace Media, https://investorplace.com/2020/09/increasing-e-commerce-activity-makes-square-a-winner/.

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