173% increase in pandemic fuel in square stocks

The San Francisco-based financial services company, developer of the Cash App, the mobile payment platform that allows users to transfer money, has seen its shares soar 173 percent this year. Its shares opened on Wednesday (September 2) at $ 170.62. At the end of 2019, it closed $ 62.56.

While banking stocks have sunk, Square reported $ 1.92 billion in net income for the second quarter (Q2), up 64 percent compared to the same period last year. Its adjusted earnings per share were 18 cents, much better than analysts predicted for losses of 5 cents.

As the global economy boosted contactless payments, Cash App revenue more than doubled to $ 325 million in the second quarter from a year earlier, The Wall Street Journal reported.

Bernstein Research, the New York investment research company, estimated that investors estimate the value of the Cash App to be up to $ 40 billion. That’s more than half of Square’s overall market capitalization and worth more than Capital One Financial Corp., First Republic Bank and all but 12 US banks, the newspaper reported.

“You have to be a bull on Cash App to be a bull on stocks,” Bernstein analyst Harshita Rawat said in a presentation, the newspaper reported. “Almost all of the stock’s performance has been driven by the Cash app.”

In July, The Motley Fool reported how bad it has been for bank stocks. Shares of JPMorgan Chase, Bank of America and Citigroup fell nearly a third from January to June, according to S&P Global Market Intelligence.

In contrast, the S&P 500 had fallen 4 percent during the same period.

The WSJ reports that investors have stayed away from bank stocks due to historically low interest rates and the prospect that credit card and mortgage defaults will hurt their bottom line.

While Square also saw losses for three weeks in March when traffic to small and medium-sized businesses declined, it has had more to recover from, the newspaper reported.

Analysts say Square’s biggest source of revenue comes from the 1.5 percent fee users pay to instantly transfer funds from their accounts. Cash App also earns a commission when users buy something with the prepaid debit card linked to their accounts.

“They have performed phenomenally in increasing the relevance of Cash App as an alternative banking service,” Anthony Zackery, portfolio manager at Zevenbergen Capital Investments LLC, told the WSJ.

Last month, Cash App launched a pilot program to offer short-term loans of up to $ 200. There is a 5 percent flat fee. After the grace period, there will be an additional 1.25 percent uncompounded interest weekly.