Will Square’s Share Price Keep Gaining?

11th February 2021

Despite small businesses experiencing a reverse in fortunes due to the coronavirus pandemic, Square stock has surged in 2020, with most of the growth coming from the consumer facing Cash App. The company’s third-quarter earnings and revenue surpassed what analysts had estimated, and the fourth quarter seems like it will be the same case.

Launched back in 2009, Square began trading on the New York Stock Exchange under the tinker SQ in 2015. Since the beginning of the year, the stock price has been steadily rising, managing to add over 250%, currently trading above the $220 range. The company offers a plethora of services, including financial services, merchant services aggregator, and mobile payment. These services are offered through different platforms, including Square reader, Square stand, Caviar, and most importantly, Cash App, where users can trade stocks and access other digital assets like Bitcoin.

Bitcoin Has Been A Catalyst For Cash App Popularity Which Has Been Good For Square Stock Price

The growth of Cash App has been fueled by the positive performance of Bitcoin, which recently traded as high as $40,000 after beginning the year at around the $7,200 range. Cash App makes it easy to trade different stocks of your liking and Bitcoin. With different assets there are additional features that help users make the most of what the app has to offer like the ability to set take profits if the asset rises to a desired level or even show to set up stop loss which will mitigate the losses you could incur if the trade goes awry.

As part of its core business, Square aims to build a two-sided digital payment ecosystem that will have products for merchants and consumers. On the merchant side, there is the credit card reader that can be plugged into mobile devices. Also, there is a Square Capital division that offers loans to sellers. Before the coronavirus pandemic came around, analysts were divided if the company’s revenue growth would continue following a period of elevated investments.

Square’s plans seem solid, but the company faces stiff competition in the merchant and small business market with its vast array of products. Its rivals consist of PayPal Holdings (PYPL) that allowed users to buy Bitcoin, store and sell it; then there is Shopify (SHOP), Stripe, First Data (FDC) clover unit, and many others.

After the emergence of Covid-19, the role of Cash App became more prominent as it served as a digital alternative to traditional banks. Many consumers used the direct deposit feature offered by the platform to receive stimulus payments from the government. But, the gross profit of the app slowed over the summer as the stimulus program expired.

Square then started testing with short-term borrowing with a new feature on Cash App. Users can take loans of $20 to $200 and pay within a month with interest. The new feature is proving quite popular among the millions of users of the app and has raised interest in Square and its stock.

Both Square And PayPal Made It Easy For First-Timers To Enter The Crypto Market

But making it possible to buy and sell Bitcoin through Cash App has to be the biggest reason why the stock of Square is doing so well. The cryptocurrency market is on a bull run that has seen Bitcoin almost quadruple its market cap since the beginning of the year. Square and recently, PayPal have paved the way for millions to access the crypto market with ease.

According to Pantera Capital, a crypto hedge fund, 40% of all the BTC that hit the market over the past two years has been from clients trading through Cash App brokerage services.

Brian Kelly, CEO and founder of BKCM, believes that the mainstream nature of Square’s Cash App and PayPal have made it easy for first-time traders to enter the Bitcoin market “It’s now easier to buy and transact with, and it’s opening up new demand by taking down a barrier to entry.”

Since commencing operations, Cash App has helped more than 2.5 million customers buy various assets and trade billions of dollars. According to a recent earnings report, the brokerage product has been the fastest-growing feature of the app—those using it conducting 28% more transactions across the platform, thus generated 15% more gross profit.

In early October, Square announced that it had purchased BTC worth over $50 million when the coin was trading around $10,000; since then, the coin has almost tripled in price, meaning the investment by Square was worth the investment.