Why Square is a tech stock investors shouldn’t ignore

Square, Inc. (SQ), the e-commerce solutions provider headed by Twitter CEO Jack Dorsey, was one of the biggest gainers in the last trading session. The stock, which ended the session up 6% after market analysts presented a bullish outlook, continued to gain early Wednesday.

Recently, the company reported first-quarter earnings that surged 83% to $0.11 per share aided by a double-digit increase in revenues. However, guidance for the second quarter was not very impressive, which weighed down on market sentiment causing the stock to fall after the quarterly report.

Related: Twitter stock surges on Q1 earnings beat

Though the stock remained low, it regained momentum in the following weeks even as the management exuded confidence that overall performance will improve during the remainder of the year supported by Cash App. The recent spike in volume growth for the mobile payment service validates the bullish view. The company has been successful in making major investments in growth initiatives without hampering the financial performance.

Square has upgraded its products and services on a regular basis, with the latest major initiative being the launch of the new online store for merchants earlier this year and Square Stand, the contact-less point-of-sale device.

Having recovered after the post-earnings dip, the stock is likely headed for consolidation in the near term. And, it might resume the upward trend once the company reports second-quarter results, given the encouraging estimates of analysts. Earnings and revenues are expected to grow in double digits in the current quarter.

Also see: Square Q1 2019 Earnings Conference Call Transcript

Considering its history of surpassing Wall Street’s projection, the chances of another beat is very high. In such a scenario, the stock might get a major push and cross the $80-mark as it did a year ago before reaching the peak.

Upgrading the stock from underperform to market perform, brokerage Raymond James this week said the debit card business of Square, which is rapidly gaining popularity, will be a key growth driver in the future.

The stock made modest gains in early trading Wednesday after closing the previous session up 6.2%. The current price of about $78 represents a 40% upside since the beginning of 2019.

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