Square has grown to become a major player in the global fintech market in less than six years. Square began selling credit card payment devices to the business, and today its Cash App has over 36 million monthly active users.
Square (SQ) went public on the NYSE in November 2015, and in less than six years, the company’s shares have grown exponentially: from $ 11.20 per share on the first day of trading after the IPO to $ 237.52 at the close of trading on Thursday.
If you bought 111 shares at the IPO price of $ 1,000, your investment would rise to $ 20,000 in 5.6 years, according to Square’s investment calculator.
However, it took a lot of patience for investors who kept stocks on their balance sheets all this time – in 2016, Square’s stock fell below the IPO price of $ 9 per share, in the following years the stock also experienced several strong falls.
A few facts about Square for investors before buying stock
Twitter (TWTR) co-founder Jack Dorsey and friend Jim McKelvey founded Square in 2009. The company offered a free solution to a business problem at the time – accepting credit card payments using portable card readers that plugged into a mobile phone slot. Thus, Square’s first product created competition for the traditional POS market and made it easier for private businesses to settle accounts.
With Square built its cloud-based tools platform, merchants also gained access to data analytics and business management.
Square’s business model is similar to how PayPal (PYPL) works – the company charges merchants a flat fee per transaction and pays a basic credit card swipe fee, which ranges from 1.3% to 3.5% in the US.
In 2013, Square released the Cash App, which allows you to transfer money from person to person. From 2016 to 2020, the number of active Cash App users jumped from 3 million to 36 million.
Last year, the Cash app’s revenue reached $ 1.23 billion (up 168% from 2019) and accounted for 45% of the company’s total profit.
Between 2015 and 2020, Square’s annual gross payments (GPV) more than tripled from $ 35.6 billion to $ 112.3 billion.
At the end of 2020, 60% of its GPV came from “big sellers,” which brought in over $ 125,000 in annual GPV, up from 39% at the end of 2015. This percentage rose to 61% in the first quarter of 2021.
The ever-growing demand for simple online payment services is driving this growth. Square’s complementary services to help with payroll processing, email marketing campaigns, loyalty card statistics, gift cards, and more are also driving the popularity and demand of Square’s platform and devices. The company also plans to add tax reporting services to the app with its recent acquisition of Credit Karma.
Will Square continue to grow?
Square’s annual revenue grew from $ 1.27 billion in 2015 to $ 9.50 billion in 2020. Square’s revenue has grown between 140% and 266% over the past 3 quarters, thanks to the addition of Bitcoin and stock trading to the app. Excluding the huge Bitcoin revenues during the pandemic, Square would have generated $ 4.93 billion in revenue last year.
Analysts expect the company’s revenue to grow 111% this year on the back of business recovery from the pandemic and economic growth, before growing another 14% to $ 22.8 billion next year.
The company’s strong results and favorable growth conditions make Square stock a great choice for long-term investors who can withstand some short-term volatility.