Square-parent Block (SQ) rallied on its third-quarter earnings report. But the 2024 performance of SQ stock sill lags versus that of PayPal Holdings (PYPL), Shift4 Payments (FOUR) and Affirm Holdings (AFRM).
In its core businesses, Square aims to build a two-sided digital payments ecosystem, with products designed for both merchant sellers and consumer buyers.
For investors in SQ stock, the 2025 outlook on gross payment volume in the U.S. merchant business looms as key as well as consumer Cash App growth.
SQ Stock: Bitcoin Factor
In a report on Square’s merchant business, Jefferies analyst Trevor Williams said: “While competition continues to intensify, we’re confident that SQ’s recent initiatives (fixing key product gaps; improved go-to-market with app consolidation, distribution partnerships, outbound sales hiring) will lead to higher win rates and support a step up in the pace of share gains.”
Block stock has gained 15% in 2024 following a rally on its Q3 earnings report. Shares rose to 99.26 on Dec. 5 amid big gains for cryptocurrency bitcoin. But Square stock has retreated during December.
“SQ’s stock has historically shown periods of high correlation with the price of bitcoin, but BTC-related activities are a very small
part of the overall business and a limited growth contributor even in periods of high volatility,” said Morgan Stanley analyst James Faucette in a recent report. “Bitcoin-related gross profit still only makes up 3.5% of the total business.”
Meanwhile, cryptocurrency prices have been volatile. Bitcoin rose past $107,000 on Dec, 16, then slumped to just below $93,000 on Dec. 23 amid President-elect Donald Trump pro-cryptocurrency policies.
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Square Stock: Stiff Competition
Meanwhile, Square faces growing competition on many fronts. In 2023, Block replaced the head of its merchant Square business, Alyssa Henry, with Block and Twitter founder Jack Dorsey.
Also, some investors fear potential weakness in Square’s point-of-sale business amid growing competitive pressures from Toast (TOST) in restaurants and Fiserv‘s (FISV) Clover unit generally.
The Square Cash App helps individuals manage money, buy stocks and cryptocurrency, and more. New banking services may be key to Cash App’s growth.
Block aims to bridge the Cash App and merchant ecosystems with consumer financing services from Afterpay. Square in early 2022 closed the acquisition of Australia-based consumer lending startup Afterpay. “Buy now, pay later” (BNPL) companies such as Afterpay compete with credit card networks.
The Square Cash App, a peer-to-peer money-transfer service, competes with PayPal’s Venmo, Zelle and others.
In late 2021, Square changed its name to Block, while retaining the ticker SQ. Meanwhile, the move reflected the company’s commitment to blockchain technology, which underpins cryptocurrency.
Block has aimed to build infrastructure that enables bitcoin-based commerce on its merchant platform. In addition, Square created a new business line to help developers build financial services products focused on Bitcoin.
In January, Square said its Bitcoin digital wallet was available for Cash App users in 95 countries.
Block Stock: Moving Up-Market
In 2023, Square management outlined a new long-term investment framework, which will put the company on the road to higher quality earnings under generally accepted accounting principles, often known as GAAP.
For merchants, Square makes credit-card readers that plug into mobile devices. Its Square Capital division provides loans to sellers.
With roots in serving such micro-merchants as food trucks and farm-stand vendors, Square has moved “upmarket,” targeting larger businesses.
In addition to selling credit-card readers, Square provides software for point-of-sale and back offices in order to manage inventory and other tasks.
Square focuses on software products that can be used across many industries, such as invoicing, payroll and marketing. It also aims to integrate its payment tools into e-commerce platforms.
Is Square Stock A Buy Right Now?
Square’s Relative Strength Rating stands at 88 out of a best-possible 99, according to IBD Stock Checkup. The best stocks tend to have an 80 or better RS Rating.
The relative strength line, the blue line in the chart above, compares a stock’s price performance with that of the S&P 500. A downward-trending RS line tells you the stock is underperforming the general market.
Block stock holds an IBD Composite Rating of 97 out of a best possible 99. IBD’s Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock’s strengths.
SQ stock, meanwhile, holds an Accumulation/Distribution Rating of B. The rating runs from a best-possible A+ to a worst-possible E. The rating analyzes price and volume changes in a stock over the past 13 weeks of trading.
As of Dec. 30, SQ stock needs to find support at its 50-day moving average. Block stock does not have an entry point and is not in a buy zone. Square stock needs to form a base to be actionable.
While Block’s valuation has dropped, IBD doesn’t put much weight on P/E ratios and other valuation metrics. On the other hand, here are some time-tested trading rules.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
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