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Here's Why You Should Buy Square (SQ) Stock on the Dip Heading into 2019

Benjamin Rains

Square SQ stock climbed early Wednesday, before it eventually fell, after reports surfaced that the financial tech firm has restarted efforts to open its own bank. With that said, Square stock is down over 30% in the past three months, which could set up a solid buying opportunity for those high on the fintech power that looks poised for serious top and bottom line growth.

Recent News

Square plans to refile paperwork with regulators to open its own bank in the state of Utah, according to a new Wall Street Journal report. The San Francisco-based firm hopes to offer loans, deposit accounts, and prepaid cards to small businesses. Square asked for similar permissions in the fall of 2017, before it withdrew its application.

It is unclear at the moment if and when the first Square bank will open. But the move is part of CEO Jack Dorsey’s—who also runs Twitter TWTR—plan to turn the company that started as a mobile device-based credit card reader for microbusinesses a decade ago into a diversified financial services firm. 

Overview

Square currently offers customers point-of-sale software and products along with services that help sellers create websites and manage their businesses. The firm also provides small business financing and loans of up to $100,000. Meanwhile, Square’s widely popular Cash App competes against offerings from PayPal PYPL and JP Morgan Chase JPM. The firm also offers a Visa V debit card that connects to a user’s Cash App account, which helps show just how popular the peer-to-peer payment industry has become. Plus, Square allows users to buy and sell bitcoin.

Last quarter, the firm launched a new all-in-one payment processor that doesn’t require users to connect their SQ credit card readers to other devices. Square has also bulked up its Square Reader software development kit to allow customers to utilize Square’s back-end ecosystem with their personalized platform to help them attract larger clients. In the third quarter, merchants who do more than $125,000 a year in gross payment volume accounted for 52% of Square’s total GPV, up from 47% in the year-ago period.

Price Movement

As we mentioned at the top, shares of SQ have tumbled roughly 31% in the last three months, which is far worse than its industry’s 14% average decline and the S&P 500’s 13% downturn. Therefore, including Wednesday’s eventual 1.5% decline, Square stock sat at roughly $59 per share. This represented an approximately 42% downturn from its 52-week high of $101 a share and gives SQ a significant amount of room to run heading into the new year.

 

Q4 & 2019 Outlook

Looking ahead, Square is projected to see its Q4 revenues to surge 47.6% to hit $909.18 million, based on our current Zacks Consensus Estimate. This would, however, mark a slight downturn from Q3’s 51% top-line expansion. Meanwhile, the company’s full-year revenues are projected to surge by a similar percentage to hit $3.26 billion. Peeking ahead to fiscal 2019, SQ’s revenues are projected to climb 34% above our current-year estimate to reach $4.38 billion

At the bottom end of the income statement, Square’s adjusted Q4 earnings are projected to soar 62.5% to reach $0.13 a share, which would also mark a downturn against Q3’s 86% climb. The company’s full-year earnings are projected to surge by 70.4% to reach $0.46 a share. Maybe more importantly, SQ’s fiscal 2019 earnings are projected to soar nearly 53% higher than our current year projection. Plus, Square boasts a solid history of earnings beats.

 

Bottom Line

Square stock, like many others, including giants Apple AAPL, Amazon AMZN, and Google GOOGL, sits well-below its 52-week high. The fintech firm also clearly sports some impressive top and bottom-line growth projections, within an industry that looks poised to boom in a banking and financial world that has moved more and more toward mobile-first. Therefore, investors might consider thinking about Square stock as we move into 2019.

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