Square (SQ) Stock – Buy or Sell?
Founded by Jack Dorsey in 2009, Square is an American multinational technology conglomerate. Its first platform was launched in 2010. The company has been traded on the New York Stock Exchange since November 2015.
Bitcoin accounts for less than 3% of Square’s real revenue
Despite Square’s big bet on crypto, its revenues from cryptocurrency have not yet made any big impact. The company reports that it generated less than 3% of its real revenue from Bitcoin. However, its Cash App, which allows customers to purchase and sell the currency, is a big part of its revenue. In fact, Cash App’s total revenue is 80% of Square’s overall revenue. It’s also been the driving force behind the rise in the price of the currency.
Cash App also makes a small fee on each transaction. The app’s total revenue grew 140% from the previous year. The company does not disclose the average price that was bought and sold during the quarter.
Its ancillary businesses offset weakness in its core physical payments business
Currently, Square has multiple products, including devices that can accept card payments, back office software, and tools for analyzing business health. In the future, the company plans to add more products, including an integrated wallet for Bitcoin. It also plans to acquire the tax business of Credit Karma. Its ancillary businesses are also expected to offset the weakness in its physical payments business.
The company also recently purchased a majority stake in Jay-Z’s Tidal music streaming service. It’s also been investing heavily in its own business. The company is also expanding its presence internationally. Its Accumulation/Distribution (A/D) rating, a measure of institutional buying, is still in the single digits.
Its long-term investment thesis remains intact
Despite the fact that Square (SQ) stock has underperformed the S&P 500 by a wide margin, investors should still consider buying the stock on a serious dip. The company’s long-term investment thesis remains intact and its stock price could remain relatively stable until signs of faster earnings growth begin to emerge.
The company operates in the booming electronic payments sector and provides software for point-of-sale and back-office functions. The company has a presence in seven countries and has a market cap of around $100 billion. Its Cash App and Afterpay, two of its more prominent products, help individuals buy and manage money. However, its competition includes a well-funded startup called Stripe, which is acquiring merchants, and PayPal Venmo, a competitor to Square’s own payment service.
NYSE: SQ Block stock is back above the 10-week and 21-week moving averages after a perfect dip down to the $83 breakout level. With the new earnings results, we are likely to see a bounce in the stock.
This is a potential buying opportunity, but the price may struggle to reach the moving average. If the market does not break below the moving average, Block will remain in the $83 to $87 area and this could lead to a nice reversal. If the price breaks below that, we would expect more pressure on the stock.
It is important to note that the market was not shocked after the big move on Wednesday. After the jobs report, the market tried to find footing.
Stop loss is a viable risk management tool
Using a stop loss is a great way to manage risk in your trading. If you are unfamiliar with the concept, you will want to understand what it is and how it works before you decide to place a stop.
A stop loss is a good risk management tool because it lets you close out a position quickly. It also allows you to set a price target for your trade. When you place a stop, your broker automatically liquidates your position when the price reaches your target. If you have multiple positions, this can save you time and effort.
Traders can also use technical indicators to set a trailing stop. A trailing stop is a good risk management strategy because it will let you know when you have a potential loss in real-time.
Its aggressive approach to generating growth
Despite the hype around Square’s acquisition of Afterpay, investors are still skeptical of Square’s growth. The company recently announced a $170 million investment in the early 2020s, but Square’s revenue growth has been disappointing in recent quarters.
The company is also planning to acquire the tax business of Credit Karma, a free consumer service. This is not necessarily a good sign for long-term growth investors. Similarly, the company is reportedly planning to launch a hardware wallet for Bitcoin.
While the company has had a banner year, Square stocks are still trading at a discount to their S&P 500 counterparts. The company has also faced stiff competition from well-funded startups like Stripe, which offers a similar service.