Tech’s strong earnings haven’t been enough to stem the rotation out of the sector that has hammered many growth stocks.
Case in point: Square (NYSE: SQ).
Last week, Square reported that its first quarter sales more than tripled to $5.06 billion, beating analysts’ estimates for sales of $3.36 billion. The payments company posted gross profit grew 79% in the quarter to $964 million, with gross profit for its Cash App jumping 171% year-over-year to $495 million.
But over the last week, the stock is down nearly 11%, and is down 20% over the last month. And that weakness looks like a buying opportunity.
“This company fits squarely in the middle of the technological transformation that’s happening within our society,” said Michael Bapis, managing director at Vios Advisors at Rockefeller Capital. “They we’re able to pivot, adapt and grow during this pandemic, even though small businesses weren’t using their app. We believe there’s still upside to go.”
Bapis added, “They have quality management, a very high customer satisfaction rate. And we think this Cash App will continue to drive cash flow in the foreseeable future as our whole society continues with this transition and fintech companies can only get stronger as we move forward.”
And Bapis isn’t the only one bullish on Square.
TradingAnalysis.com founder Todd Gordon argues the stock is being unfairly punished by the rotation out of tech and growth stocks, and offers investors a solid long-term bet.
“They have a strong crypto offering which you really need to focus on, peer-to-peer payments, and they’re really encouraging investing within their ecosystem which is Cash App,” Gordon said. “It’s the top 10 most downloaded app so it’s got a really broad ecosystem of banking, investment, spending.”
Also helping Square, the payments company recently opened up its platform to cryptocurrency transactions, and reported $3.5 billion in Bitcoin revenue in its March-ended quarter. The company also owns Bitcoin, representing around 5% of total assets at the end of last year.
“Our focus, first and foremost, is on enabling… Bitcoin to be the native currency,” said CEO Jack Dorsey on the company’s earnings call. “It removes a bunch of friction for our business. And we believe fully that it creates more opportunities for economic empowerment around the world.”
And analysts have applauded Square’s crypto commitment, with Mizuho Securities’ Dan Dolev writing in a note that if Dorsey is right, “this should have future competitive advantages for Square vs. competitors.”