Square Stock to Gain Further as Ecosystem Expands
If you have ever swiped your card to make a payment at a department store, you understand how easy and convenient it is. With the rise of technology in financial services, the financial technology (FinTech) space is getting more exciting. There are many players gaining from this trend, but one name stands out.
Square Inc (NYSE:SQ) has grown by selling card readers and other payment services to small- and medium-sized businesses. The company has built an interconnected ecosystem that helps sellers start, run, and grow their businesses.
Square provides advanced software with affordable hardware that enables sellers to turn mobile and computing devices into powerful payment and point-of-sale solutions. The company has come a long way from selling credit card readers. And the gains posted by SQ stock prove this.
Today, Square Inc offers software and services to manage the entire payment lifecycle, from onboarding to accepting in-person and online payments to fast settlement of funds as well as to manage disputes.
And it has become difficult to ignore Square devices. The company has grown rapidly and serves millions of sellers from a diverse set of industries and different geographies including the U.S., Canada, the U.K., Japan, and Australia.
For the year ended December 31, 2017, Square processed $65.3 billion of gross payment volume (GPV), which was generated by 1.4 billion card payments from about 287 million payment cards. (Source: “Q4 2017 Shareholder Letter,” Square Inc, February 27, 2018.)
Square has been adding sellers efficiently and helping them grow their businesses once they join its platform. This has led to continuous growth for Square Inc and is reflected the phenomenal growth in Square stock.
Its “Cash App” offering empowers individuals by providing access to the financial system and allows customers to electronically send, store, and spend money, once their Cash App account has been opened. Square stock also witnessed higher demand when it introduced the feature to buy Bitcoin through Cash App.
Through a partnership with an industrial bank, Square Capital facilitates the offering of loans to pre-qualified sellers.
As the commerce ecosystem built by the company expands, its competitive advantage also grows stronger. The digital payments sector is one of the fastest-growing spaces right now and SQ stock is one of the best ways to play this trend.
Square is focused on its priorities to strengthen commerce through multiple channels, expand financial services, and grow current international markets. As per the company’s recent investor presentation, Square Inc is building a commerce ecosystem that is worth more than $70.0 billion. (Source: “Square Investor Presentation,” Square Inc, last accessed December 20, 2018.)
Square will most likely reach its target as clearly and consistently shown in its quarterly results. For the third quarter of 2018, total net revenue grew 51% year-over-year. It reached $882.0 million as compared to $585.0 million last year. (Source: “Q3 2018 Shareholder Letter,” Square Inc, November 27, 2018.)
GPV was $22.5 billion, up 29% year-over-year. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $71.0 million in the third quarter of 2018, compared to $34.0 million in the third quarter of 2017.
The company also launched “Square Terminal,” a portable, all-in-one payments device to replace traditional keypad terminals. Square Terminal will likely expand the company’s addressable market to serve new sellers and new use cases.
The company also introduced “Square Installments,” its new purchase financing plan. It gives sellers a growth tool that ensures they get paid in full while allowing their customers to pay in monthly installments.
The continuous innovation and growth has been good for Square stock, which is up by about 68% over the last one year. It is up by 160% since we covered it in June 2017 on Profit Confidential, saying that it had more triple-digit upside.
Chart courtesy of StockCharts.com
Square has diversified its hardware portfolio over the years and now offers a diverse range of software and services on top of its devices. Its advanced software helps sellers manage payments, orders, inventory, employees, and customers, all integrated to create a cohesive experience.
This bodes well for SQ stock going forward. The company’s mission is to enable everyone to participate and thrive in the economy. And it is executing its strategy well to achieve this.
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