It’s no exaggeration to say that investors in Square (NYSE:SQ) had an amazing 2020. Without a doubt, the onset of the novel coronavirus and the resultant e-commerce boom provided a tailwind to SQ stock.
Is a repeat performance possible in 2021? We’re just starting the second quarter, so anything’s possible.
For the shareholders to continue seeing strong returns, Square will need to prove that it’s still an innovator in the e-commerce ecosystem.
That would be the way to justify higher share prices — and fortunately for Square’s investors, a recent development suggests that the company’s still among the best in the business.
SQ Stock at a Glance
Prior to the onset of Covid-19, SQ stock was riding high at around $80 per share. At that time, the e-commerce market was expanding at a strong pace.
The pandemic panic sent the shares down to $38, but not for long. After bottoming out, the stock started on a journey to much higher price levels.
By the end of 2020, SQ stock was worth $217 and change. This stock was the poster child of the 2020 e-commerce boom.
So, how have shareholders fared in 2021 so far? They’re still posting decent returns, with the stock price settling at $256.57 as of midday April 27, 2021.
It’s entirely possible that the market is digesting last year’s gains in preparation for another leg up. Just remember, seemingly high-priced stocks can keep going up, especially when they represent solid companies.
Catering to Consumers
Generally speaking, consumers know Square for its popular peer-to-peer money-transfer service, known as the Cash App.
If you aren’t very familiar with the Cash App, then you might assume that it’s only used for point-of-sale purchases. Granted, that’s one of the app’s primary purposes, but there’s more to the Cash App than that.
Square’s investor presentation does a good job of explaining how the Cash App generates revenues from consumers in multiple ways.
As Square explains, the Cash App ecosystem represents a $60 billion revenue opportunity in the U.S. Here’s how the company breaks this dollar figure down:
- $41 billion in spending
- $20 billion in sending
- $2 billion in investing
Thus, the Cash App isn’t just about making purchases. Some customers even use the app as a replacement for a traditional bank.
The onset of the coronavirus undoubtedly helped to promote the Cash as a viable alternative to conventional banks. For instance, some consumers received government stimulus payments through the Cash App’s direct deposit feature.
Moreover, the Cash App currently offers a stock trading feature. Considering all of these ways for customers to use the Cash App, it’s reasonable to view it as not just an app, but a suite of value-added services for consumers.
Responding to Merchants
Then there’s the other side of the coin: Square’s relationship with the sellers.
To truly maintain an e-commerce ecosystem, Square must be responsive to its network of merchants. In order to achieve this, the company recently announced that it’s introducing new inventory management features.
Reportedly, the new functionalities will enable Square’s sellers to:
- Use barcode scanners to take stock of inventory
- Receive machine-learning-driven alerts to see when an item is due to run out
- Scan item barcodes and see item information populate automatically
Apparently, the new inventory tracking features will have names like “Smart Stock Alerts” and “Easy Item Create.” With these in their arsenal, merchants may be better positioned to capitalize as the public gets back into a buying mood.
“We’re looking forward to providing sellers with access to the tools they need to prepare for reopenings and the year ahead,” clarified Roshan Jhunja, Square’s general manager for retail.
SQ Stock: The Takeaway
As you can see, Square is making strides in connecting with both the buyers and the sellers.
And as the company continues to demonstrate its responsiveness, SQ stock investors can hold their shares in anticipation of another impressive year of gains.
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.
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