Square, Inc: Riding the Tide of Fintech Disruption in the Financial Industry
On the tide of rising fintech markets, it is interesting to note how companies like Square, Inc (NYSE: SQ ) have affected the portfolios of major financial groups such as Berger Financial Group Inc. In a recent Securities and Exchange Commission 13F filing, the latter disclosed that it had decreased its holdings by 7.0% in shares of Square Inc., with the fund owning 21,951 shares worth $1,379,000 at the end of 2019Q4.
Square has been no stranger to innovating and disrupting traditional payment systems since its inception in 2009. The San Francisco-based company has delivered scalable point-of-sale software-hardware solutions that turn computing and mobile devices into payment collection points. The merchant ecosystem includes EMV® chip-enabled card readers as well as contactless card readers that accept Near Field Communication payments that integrate blockchain technology to speed transaction times. Furthermore, it also claims to have eliminated gateway fees on transactions that offer quick money movement between businesses or individuals.
The global fintech market size is expected to reach $305 billion in just three years (2023), mainly driven by growing demand for online banking and mobile payments. No wonder Square’s stock has been on an upward trend despite suffering somewhat during the current pandemic period where many small businesses are affected due to shutdowns.
Even Barron’s analysis published on April 22 suggests that given currently favorable market conditions due to demand spikes due to shutdowns followed by states now gradually reopening as they offer guidance regarding health precautions being lifted, demand will increase further, albeit slowly due to cautious continuation approach to resuming operational activities.
Currently, the block stock opened at $66.36 on Tuesday with a low opening overall this year compared to last year’s all-time high – adding significant gains to the pockets of investors who invested earlier when the shares were highly profitable, ensuring higher net returns among other companies while encouraging them all to keep the growth increasing. In addition, Square has a healthy balance sheet and varied product offerings that further insure it against market volatility.
Wherever the wave of fintech continues, it’s likely that companies like Square will continue to innovate and disrupt systems, presenting both an opportunity and a challenge for the financial industry’s incumbents. To be or not to be a part of this period of change for payments is a perplexing question that everyone must consider carefully when considering their investment decisions.
Institutional investors increase stake in Square Inc despite mixed earnings report
Square Inc, a technology company known for providing payment and point of sale services, has recently noted changes in its share ownership by institutional investors. Whittier Trust Co. increased the stock value in the company by 8.2% resulting in owning $2,355,000 worth of stock. DekaBank Deutsche Girozentrale also saw an increase of 0.8% owning shares worth $7,312,000. Other such investors include NuWave Investment Management LLC and AlphaCrest Capital Management LLC. These investors have made significant profits due to the sharp rise in Square’s stock value.
Square had seen a drop in the stock market after it last announced its quarterly earnings on February 23rd with a ($0.23) EPS versus the forecast ($0.16) EPS, resulting in negative return on equity of 2.28%. However, this did not deter stock valuations offered by the various brokerages such as Citigroup or Keefe Bruyette & Woods. Some analysts downgraded Square from an outperform rating to a market perform rating, but other brokerages such as Wedbush upgraded their outlook from neutral to an outperform rating.
Recently, there has also been a sell-off with CFO Amrita Ahuja and insider Alyssa Henry both selling significant amounts of the stock at significant prices; however, institutions and hedge funds still own over 50% of Square’s shares.
Overall, while there is mixed feedback on recent earnings reports, many investors remain confident that Square will continue to deliver profitable results in the short term due to its hardware products such as the Magstripe Reader or non-hardware solutions such as Contactless and Chip Reader that accept EMV® chip cards and near-field communication payments that allow customers to purchase products without swiping their card via a magnetic stripe reader or PIN punch device – meaning less risk in times of COVID where customer frequent contact should be avoided if possible
