Square Inc. has been having a very good year.
The San Francisco-based financial services company, developer of Cash App, the mobile payment platform that allows users to transfer money, has seen its stock soar by 173 percent this year. Its stock opened Wednesday (Sept. 2) at $170.62. At the end of 2019, it closed $62.56.
While bank stocks have tanked, Square reported $1.92 billion in net revenue for the second quarter (Q2), up 64 percent compared to the same period last year. Its adjusted earnings per share was 18 cents, much better than the 5 cent loss analysts predicted.
As the global economy fueled touchless payments, Cash App’s revenue more than doubled to $325 million, in Q2 from a year earlier, The Wall Street Journal reported.
Bernstein Research, the New York investment research company, estimated investors put Cash App’s value at as much as $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 U.S. banks, the newspaper reported.
“One has to be a bull on Cash App to be a bull on the stock,” Bernstein analyst Harshita Rawat said in a presentation, the newspaper reported. “Almost all of the stock performance has been driven by the Cash App.”
In July, The Motley Fool reported just how bad it’s been for bank stocks. Shares JPMorgan Chase, Bank of America and Citigroup fell by nearly a third from January through June, according to S&P Global Market Intelligence.
In contrast, the S&P 500 had fallen by 4 percent during the same period.
While Square also experienced losses for three weeks in March when traffic to small and medium-sized businesses diminished, it has more than rebound, 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 purchase something with the prepaid debit card linked to their accounts.
“They’ve executed phenomenally on increasing the relevance of Cash App as an alternative banking service,” Anthony Zackery, a 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’s a flat 5 percent fee. After the grace period, there will be an additional 1.25 percent of non-compounding interest weekly.