Why Square Stock Still Has Excellent Upside Potential

Square (NYSE:SQ) stock has been on fire since late-March. On June 22, the stock rose 6.6% and touched its 52-week high of $105.46 and closed at $104.45.

Sophia Nicholson - Author

Jun. 23 2020, Published 10:15 a.m. ET


Square (NYSE:SQ) stock has been on fire since late-March. The stock touched its lowest level of $32.33 on March 18 due to COVID-19 losses but recovered soon. On June 22, Square stock rose 6.6% and touched its 52-week high of $105.46 and closed at $104.45. Overall, the stock has gained around 66.6% since the beginning of the year. As of June 22, Square’s market capitalization is $45.9 billion.

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Why is Square stock rising?

Square has been growing its revenues on the back of its payments processing business. The company helps small businesses collect payments, grow their businesses, and make point-of-sale solutions. With Square’s tools, sellers can manage orders, engage customers, and gain access to business loans. During the pandemic, the company’s payment services witnessed stellar demand. Many brick-and-mortar retailers adopted Square’s services.

Square has also been generating revenues from its Cash App—its money transfer platform. Cash App is a peer-to-peer app. The app facilitates person-to-person and person-to-business payments. Investors should note that Cash App has become popular during the coronavirus pandemic. Now, Cash App is a $1 billion business. The recent acquisition of Spanish startup Verse will likely support Square’s growth story and boost its payments business in Europe. Verse is a peer-to-peer payments app that allows users to send and receive cash.

Will the stock continue its growth story?

In the most recent first quarter, Square’s revenues rose by 43.9% YoY despite the coronavirus crisis. The company’s gross payment volume also increased by 13.7% YoY in the quarter. Square’s Cash App business continued to witness impressive growth and contributed to its gross profits. The company’s gross profits expanded by 115% YoY in the first quarter. The company expects its gross profits to continue to grow due to strong demand for Cash App’s services.

I think that Square can ride out the current volatility. The company has the potential to grow due to its strong fundamentals, the rising demand for its services, and its Cash App business.

Square stock has already reached its highs. Still, the stock should continue to grow in the coming quarters amid the e-commerce boom. However, investors should wait for a dip in the stock and go long on Square stock.

Shopify (NYSE:SHOP) is another stock that’s currently trading at its highs. Shopify is a great stock for long-term investors due to its growth story. So far, Shopify stock has risen over 127% this year.


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