3 Reasons Why Square is Poised for a Comeback

by | Sep 4, 2019 | Markets

The company’s shares are down nearly 30% from a year earlier.

Shares of Square have remained largely flat over the past couple months and are down nearly 30% from a year earlier. But on Tuesday, two different analysts upgraded the stock, arguing that better times may lie ahead. 

MoffettNathanson analyst Lisa Ellis upgraded the stock from neutral to buy on Tuesday morning. Ellis cited the company’s recent acquisition of a delivery food service as the reason for the upgrade. And SunTrust Robinson Humphrey analyst Andrew Jeffrey upgraded the stock from hold to buy. 

Over the summer, Square largely underperformed the S&P 500 so some investors may have a hard time believing now is the right time to invest. Here are three things you should know before buying shares of Square.

The company is largely immune to the trade war

Wall Street is wary of any companies that are sensitive to possible tariffs and the ongoing trade war. Fortunately, this isn’t a problem for Square since the company doesn’t do any business in China. 

Square focuses on offering digital payments, analytics services, and it has a lending service for small businesses. The company’s revenue rose by more than 60% last year and it expects continued growth of more than 40% in 2019.

Square’s Cash App hit record downloads this summer

A huge driver of growth for the company is its Cash App. This app lets consumers make peer-to-peer payments and it consistently outperforms PayPal’s Venmo. 

Square continues to add new features to the Cash App which makes it more appealing for consumers and it provides a greater source of revenue for the company. The company plans that eventually, the Cash App will be able to do everything a traditional bank can do. 

The company has a solid business model

One of the biggest draws for Square is how straightforward the company’s business model is. Consumers can easily make and accept payments using the company’s software. This makes the company attractive to small businesses and consumers alike.

Square’s stock has been down ever since it released a disappointing earnings report in early August. But the earnings report doesn’t change anything about the company’s business model. So the temporary dip in the company’s shares may just provide a perfect opportunity to invest.