Square (NYSE:SQ) stock fell 28.56% on March 16, which marked its worst day since going public in 2015. The plunge extended the stock’s 12% decline in the past week. Square and other stocks have been falling lately as the coronavirus situation drives investors into panic selling company shares.
Square is a financial technology company. The technology enables small businesses to accept credit card payments. The company makes money by charging a fee to process payments for merchants. In the fourth quarter of 2019, Square made $832 million from transaction fees, which contributed 64% of its total revenue.
Coronavirus rattles Square stock and customers
Restaurants account for a large portion of Square’s customer base. Notably, restaurants have been taking a serious beating from the coronavirus. To curb the spread of the deadly virus, authorities across the US told restaurants to close or limit their capacity.
If sales at restaurants drop due to measures to stop the coronavirus, Square will feel the pinch. The stock has taken a hit as investors worry about its financial results. The results might get impacted if the coronavirus cripples small businesses like restaurants, which generate most of Square’s revenue.
Trump administration plans to save Square customers
The Trump administration is seeking $850 billion to help cushion the economy from the impact of the coronavirus. The huge economic stimulus package will provide relief to small businesses in the US, which are Square’s customers. Usually, small businesses operate on lean budgets. There have been fears that many small businesses could go bankrupt and close if the government doesn’t step in and help them. Now, that’s what the White House is trying to do. Overall, the stimulus package should be good news for Square because help is coming for its customers.
Square’s revenue rose 41% year-over-year to $1.3 billion in the fourth quarter. The company turned a profit of $17 million in the quarter. However, a one-off boost from the sale of its food delivery business Caviar saw the company reported a $391 million profit. The fourth-quarter results beat the consensus estimates, which led to more than a 5.0% increase in Square stock after the earnings report.