Like almost every business worldwide, Square (NYSE:SQ) has been hurt by the novel coronavirus pandemic. SQ stock has lost nearly 25% of its value since February, as investors question how long it will take the payment processor to recover in the wake of the economic shutdowns.
Earlier this week, Compass Point downgraded Square stock from “neutral” to “sell.” The firm offered a $50 price target for SQ stock, representing a downside of 24% from where the shares are trading today. The downgrade further stoked fears that Square’s small-business customer base will deteriorate significantly over the next few months.
In many ways, though, the bearish mood on SQ stock is a good thing for investors. It’s a case of not seeing the forest through the trees. Yes, Square is going to lose some of its customers’ courage — and that’s not great for business. But long-term, and even medium-term, the company is well-positioned to be a leader in the financial technology space.
That said, there could be significant turbulence for Square investors over the next few weeks. However, the current pullback represents a worthwhile opportunity to start building a position.
SQ Stock Is a Bet on the Future of Payments
Square certainly wasn’t the first tech company to insert itself into the payment processing space. However, its sprawling suite of services has made it a popular choice for small businesses looking to streamline their operations. Square is a one-stop-shop for merchants who want to take their businesses online. The firm does everything from payroll to website management.
But what’s most exciting about Square’s potential is the fact that the firm is also adding banking services to that list. The firm had its Industrial Loan bank charter approved days before the stock market hit its bottom. That will allow Square to start making its own small business loans via Square Financial Services beginning in 2021.
Moreover, the ecosystem that Square has created is a powerful tool that locks in customers and attracts new clients. Sure, next year will undoubtedly be a rough one for SQ’s key customers: small business owners. But the coronavirus pandemic isn’t going to wipe out small businesses completel. In fact, it could spur on a host of new products and services borne out of the crisis itself.
Square Is Ready for Battle
Another positive that investors should be considering is Square’s ability to get to the other side of this crisis. The economic downturn we’re suffering right now was self-inflicted; We’re the ones who put the economy on pause. So, although there will undoubtedly be some casualties once it’s up and running again, those will financial fortitude will be able to press onward in a post-coronavirus world.
Square is one of those companies we’ll no doubt see thriving on the other side. For one thing, Square has leveraged its ability to communicate with America’s small business leaders by facilitating Paycheck Protection Program loans. Customers are able to sign up using the Square platform, and the company is keeping them updated on when the funding becomes available.
Taking away some of the friction involved in getting government assistance is just another way Square is strengthening its tie-ups with business owners. It further underscores that the company’s goals are aligned with that of its merchant, and Square needs them to do well to keep growing. In turn, that link makes Square a powerful ally for entrepreneurs and deepens trust and loyalty among customers.
Not only that, but Square’s peer-to-peer platform Cash App gives the firm a lifeline during the shutdown. Cash App hasn’t seen the same kind of coronavirus-associated decline as the rest of Square’s business. In fact, some say the coronavirus could help Cash App reach new users as families look for ways to send money to each other.
The Bottom Line on SQ Stock
SQ stock is an excellent way to make use of the market’s pullback. Despite the company’s notoriety, it’s only just begun to make its mark on the financial services industry. Not only is Square’s banking status a considerable growth catalyst in the post-coronavirus economy, but the firm has a ton of space to grow internationally as well. In fact, right now, Square is only operating in five countries.
With that in mind, long-term investors who can take on some volatility in the near-term should consider snapping Square stock up now while it’s trading at a significant 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.
