Square (NYSE: SQ) On The Verge Of Fresh All Time Highs

By the time the bell rang to end Monday’s session, shares of fintech giant Square (NYSE: SQ) were up more than 10% on the day after coming within $3 of hitting an all-time high. This latest pop comes off the back of a multi-week rally which has seen the stock surge close to 50% in little more than two months. It means shares are back up at the top of the range that’s been forming since they tapped out at the $280 level in February and then again in April of this year. 

It’s been a busy week already for the San Francisco headquartered stock, and we’re not even halfway through. On Sunday night, they released their Q2 earnings which were for the most part impressive. Analysts had been expecting GAAP EPS to come in at a loss of -$0.05, but instead, management was able to deliver a resounding beat with a $0.40 print which was very much in the black. On the revenue front, the company was able to post a triple-digit percentage increase of 144% compared to the same quarter last year, although this was a little soft compared to the consensus. Still, what investor is going to shy away from a company growing at that kind of rate?

Solid Numbers

There were other notable numbers worth mentioning, such as the 29% increase in gross payment volume for the quarter, and the 40 million monthly transacting active customers that their Cash App service counted. This look under the hood at the internal engine went a long way to justifying the stock’s 700% run that began in March of last year. For a company with a 400+ price-to-earnings ratio, there’s always the danger that their shares will start to look heavy as interest rates increase, something that’s been a consistent theme for much of 2021. But as Wall Street starts to look more and more comfortable with higher inflation readings and the updates from the Fed on their policy, growth stocks like Square are finding a strong bid in their shares again. 

All that being said, it would be wrong to say that yesterday’s jump was based purely on the earnings report. Indeed, the astute investor will have noticed that they were released on Sunday night which is rather unusual and in fact was earlier than Square had planned. The reason for the change to a Sunday night release was to tie it in with another piece of exciting news that also hit the headlines that night. 

Fresh Acquisition

In a sign of how keen the company is to keep innovating and increasing its market reach, management announced a $29 billion acquisition of Australian fintech Afterpay. The deal is expected to close in the first quarter of 2022 and initial plans have Afterpay being integrated into the aforementioned Cash App and Seller services. Afterpay is among the fastest-growing names in the “buy now, pay later” space, which has become one of the hottest industries in 2021, with the likes of Swedish firm Klarna already sitting at a $45 billion valuation. 

Square CEO Jack Dorsey summed up the deal nicely in a statement when he noted that “Square and Afterpay have a shared purpose. We built our business to make the financial system more fair, accessible, and inclusive, and Afterpay has built a trusted brand aligned with those principles." The move comes as competition in the space heats up, with Apple (NASDAQ: AAPL) reportedly in talks with Goldman Sachs (NYSE: GS) to launch a similar service, while Paypal’s is already live. Afterpay is by far Square’s biggest acquisition to date and further strengthens their trajectory to become a fintech powerhouse over the coming decade. 

Their shares were trading up again in Tuesday’s pre-market session and look set to consolidate Monday’s pop. There’s more than enough fundamental momentum in play right now to keep the bid strong, so if shares can push on through the $280 mark in the next few days they’ll be into blue sky territory. As we saw time and time again last year, for Square at least, good things tend to happen when that’s the case.