Square Stock Is Poised For Huge Growth Over The Next Decade; Here’s Why
Fintech giant Square (SQ Stock Report) is a hot commodity in the stock market this year. Despite the significant impact from the coronavirus pandemic, or perhaps because of it, Square stock has been one of the biggest winners in 2020. The acceleration of digital payments in the U.S. and globally is real. As a result, the company has been able to benefit immensely, sending SQ stock price nearly 250% higher year-to-date.
With gains of this magnitude, it’s not surprising that some value investors may prefer to stay away from putting their money in SQ stock. In addition, with the roll-out of the COVID-19 vaccines, there has been a gradual rotation out of the high flyers this year. Many investors are moving their money into stocks of companies in the traditional economy. As such, this could be the very reason the company’s stock price has been trading sideways for the past two weeks. And if you ask me, I’ll take a chance on SQ stock whenever there are dips. You see, the company has been working on a lot of things such as digitizing and beefing up their e-commerce operations. And according to their latest fiscal report, they are doing things all right.
What’s more, the stock has been bringing so much gains to shareholders. It’s understandable that investors want to take some profit. However, looking at its momentum building up to the end of 2020, there may be a good chance for the momentum to extend into 2021. So, what could potentially give SQ stock another booster in the coming year?
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Cash App Is A Money Making Machine
The fintech company is well known for its Cash App. Square may not be the first company that comes to mind as stay-at-home stocks. But it is worth pointing out that Cash App users have doubled over the past year. Therefore, you could say that Square has benefitted from the pandemic to a certain extent. So when institutional investors rebalance their portfolios, there’s a good chance they will ditch stocks that have benefited significantly from the COVID-19 pandemic and start to look for growth elsewhere. However, let’s not forget about the fundamentals that brought Square stock to the level it is today.
For the uninitiated, Cash App is a peer-to-peer money-transfer service, competes directly with PayPal’s (PYPL Stock Report) Venmo, First Data’s (FDC Stock Report) Clover, and others. In other words, it is a readily available app that is used to make quick cash transfers between users and facilitates cash transactions with businesses.
The company’s Seller ecosystem is a series of payment solutions focused on Business-to-Customers (B2C) transactions. According to RBR’s Global Payment Cards Data and Forecasts, card payments are expected to become a $45 trillion global market by 2023, which means the Cash App will be a cash cow for the company moving forward.
Square’s Bitcoin Investment Has Been Paying Off Handsomely
Apart from money transfer and payment solutions, the fintech company has also been in the limelight for different reasons. Back in 2018, the company started to allow its users to trade Bitcoin through the Cash App. This might appear as a bold move at that time. But now that the bitcoin price has skyrocketed past $29,000, investors are looking at SQ stock once again. From its latest quarterly report, Cash App generated $1.63 billion of bitcoin revenue during the third quarter of 2020. It also saw $32 million of bitcoin gross profit during this period.
Square’s $50 million investment in bitcoin paid off so well that it is already paying dividends. The fintech company bought 4,709 bitcoins in early October. Of course, the price of bitcoin more than doubled since then. You could say that the increase in SQ stock in recent months has something to do with the virtual asset. Some members of the cryptocurrency community believe bitcoin could rise to a six-figure price tag in the near future. If so, that would no doubt be a positive for Square.
As you may or may not know, there’s a feature called Boosts within the Cash App. As the company explains, “Boosts let you save money instantly when you use your Cash Card at coffee shops, restaurants, and other merchants. To get started, all you need is a Cash Card.” And from the company’s recent tweet, Cash App now allows their clients to use Cash Cards to earn bitcoin with the purchase they make. With the crypto space getting hotter than ever, this could be a good catalyst to get crypto enthusiasts to engage with Cash App.
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Potential Growth Opportunities In The Music Streaming Space
With increasing internet and smartphone usage, music streaming is gaining rapid traction globally. With the increasing millennials in its system, it makes sense for Square to expand its service offerings to its younger users. According to Bloomberg, Square is in a discussion with Jay-Z’s music streaming service Tidal.
With Spotify (SPOT Stock Report) continuing to record solid growth among its paid subscribers, there may be reasons for any company with the financial might to venture into this booming market. Besides, Square could leverage its increasing user base to monetize the music platform. Should the acquisition happen, it could provide Square a new growth market.
Admittedly, Bloomberg also reported that Square’s CEO Jack Dorsey is looking to build on Square’s existing services and growing popularity with young users. And it is by adding additional stand-alone services to complement the products it already offers. These include online shopping, delivery, loyalty programs, gift cards, money management, and loans. Recall that Dorsey is a board member at Walt Disney (DIS Stock Report). Perhaps his ambition to expand Square’s business offerings into music entertainment should not come as a surprise.
There is no shortage of investors who believe that Square is trading at a rich valuation. On the other hand, there are also many who think that the price tag is justifiable. With over 30 million monthly active users, there remains plenty of room for Cash App to grow its user base. The rising popularity of bitcoin is the icing on the cake for Square as that could drive user engagement. But let’s be clear, Square stock could do just as well with or without its crypto operation. After all, Square is a payment processing company. More than $100 billion of annualized payment volume now flow through Square’s platform. Therefore, it’s safe to say that the growth runway is far from over.
Over the long term, the introduction of new features on Square could mean that it is replacing at least some of the roles of a traditional bank. Considering the growing user base of Cash App and the bullish momentum from bitcoin, is SQ stock a buy before the new year? You be the judge.