Back to top

Image: Bigstock

Time to Buy Square (SQ) As Stock Jumps Again?

Read MoreHide Full Article

Shares of Square, Inc. (SQ - Free Report) surged nearly 3% Tuesday to extend SQ’s impressive run on the back of its increased push into small business finance and more traditional banking. Square stock has jumped over 15% in the last week alone, so is now the time to buy SQ amid what could be just the start of the new banking age?

Overview & Recent News

Square’s second-quarter revenues soared 48% from $551.5 million to $814.9 million. The financial services company, which started as a credit card processing firm for small business, among other things, saw its gross payment volume jump 30% to $21.4 billion. Square also noted that half of its GPV came from “larger sellers”—ones who generate more than $125,000 in annualized GPV—for the first time ever.

On top of its small business financial tools, investors should note that Square’s peer-to-peer payment app, the Cash App, has become widely popular. It was the #1 finance app in the U.S. during the second quarter and was on average a top-30 app in the App Store. Square’s Cash App competes directly against PayPal’s (PYPL - Free Report) Venmo, as well as JPMorgan Chase’s (JPM - Free Report) QuickPay in the p2p payment space.

Square, which was co-founded and is currently run by Twitter CEO Jack Dorsey, has long had plans to become a diverse and expansive bank and finance company. Beyond trying to compete with credit card giants and Apple (AAPL - Free Report) and Google (GOOGL - Free Report) Pay, Square has its sights set on becoming their user’s go-to place for nearly everything. “Anything you do today with a bank account, you should look to the Cash App to begin to emulate more and more of that," CFO Sarah Friar said at a Recode conference recently. “Maybe help them with their savings — how can we help them make their money work for them?”

Dorsey noted over the summer that users have started to treat Square’s Cash app more like a bank account, keeping more money in the app to pay friends and family. The company now offers a Visa (V - Free Report) debit card that is connected only to the Cash App that allows users to pay merchants and retailers with funds from their Cash App balance.  

The San Francisco-based fintech company also offers loans to it qualified business customers through Square Capital. The firm’s lending division struck a deal with eBay (EBAY - Free Report) this summer that will see Square offer loans to sellers on the e-commerce platform—Amazon (AMZN - Free Report) offers its third-party sellers similar loans. Plus, just last week, Square introduce a mobile version of the payroll offering it launched in 2015 to help the firm better compete with the likes of Paychex (PAYX - Free Report) and others.

Stock Performance

Square stock has been on a tear for some time now. Shares of SQ have skyrocketed over 665% since going public in the fall of 2015, which destroys the S&P 500’s roughly 48% climb. SQ stock has continued its massive run over the last 52 weeks, up over 234% against its industry’s 33% jump. 

Square saw its stock price pop nearly 3% in morning trading Tuesday to hit $100.42 per share, which is just inches below its all-time high of $101.15 per share.

 

Outlook

Looking ahead, our current Zacks Consensus Estimate is calling for Square’s Q3 revenues to jump 47% to hit $860.52 million. Meanwhile, its full-year revenues are projected to hit $3.32 billion, which would mark a 45.7% surge.

Investors might be even more pleased with Square’s bottom line growth projections. The firm’s adjusted quarterly earnings are projected to climb by over 57% to hit $0.11 per share, while its full-year EPS figure is expected to expand by approximately 67%.

Bottom Line

Square is currently a Zacks Rank #3 (Hold) based on its recent earnings estimate revision trends. But the company looks poised to expand both its top and bottom line in major ways in a booming fintech industry. Therefore, it might be time to think about buying SQ stock even as it rests near its all-time high. 

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>