If there’s one investment I regret missing out on, it’s retail-technology outfit Square (NYSE:SQ). During the summer of 2016, SQ stock dropped to single digits. Late last year, the company completed a dramatic turnaround, with shares briefly touching $100. But even at its current price of just under $66, Square has done well for its long-time stakeholders.
Source: Via Square
Partially, I blame the cryptocurrency surge for taking my eyes off the ball. The concept surrounding Square stock is so simple yet so incredibly ingenious. Take a small card-swiper, make it compatible with popular smartphones, and presto! You have a platform that enables small-business owners to compete with the alpha dogs of their industries.
I’ve seen firsthand how this diminutive square device has transformed my local business community. In the Amazon (NASDAQ:AMZN) era where anything physical is subject to disruption, Square brought disruption for — and in favor of — the little guy. This breathed new life in the broader brick-and-mortar business model, fueling SQ stock gains.
That said, the second quarter of this year is not turning out favorably for the company’s equity. Since the beginning of April, Square stock is down nearly 14%.
Most of that ugliness comes down to Square’s disappointing second-quarter earnings report. While the tech firm beat the consensus print for both earnings per share and revenue, management shared profitability and sales guidance that fell short of analysts’ estimates. As a result, SQ stock slipped and still looks pensive.
The other problem is competition. Major players, such as Mastercard (NYSE:MA) and Visa (NYSE:V), have seen their revenues disrupted by third party payment processors like Square, Stripe and other fintech entrants. They have the resources, though, to return the favor, casting a cloud on Square stock.
SQ Stock Sitting on a Japanese Goldmine
Now, I’m not going to guess the nearer-term price swings. Clearly, the bullishness in SQ stock got a little out of hand last year. The latest earnings report brought the speculative fever back down to earth. Ultimately, I think this is a good thing for patient investors seeking an ideal time to jump aboard.
That’s because Square stock has viable opportunities both here and abroad. In the U.S., small businesses are the engine of the economy. They’ve also contributed the most nominally to the recent employment surge. Arming them with the tools to succeed is always a net positive.
But one of the international markets I’m most excited for regarding SQ stock is Japan. Historically, Japan was a cash-based society, and even to this day, this dynamic remains. It’s one of the country’s strange contradictions: a tech leader that still transacts in paper.
In order to juice-up its economy, the Japanese government is desperately urging its citizenry to adopt card and digital payments. Initiatives are working, albeit very slowly. In fact, taxi drivers in Japan have only recently started to accept credit cards, but most still prefer cash.
Since Square stock is an indirect investment into the cashless trend, Japan initially appears a headwind. But here’s the thing: Japan is getting older rapidly, so old habits are likely to fade. Furthermore, the Japanese are very well-traveled, and are eager to adopt certain western conveniences.
As the next generation of Japanese entrepreneurs and small-business owners step in, they’ll serve the next generation of consumers. Very likely, these younger customers and clients will prefer cashless payments. With Square already levering a relatively significant presence in Japan, it’s in prime position to profit.
That alone could send SQ stock soaring.
Buy the Discount in Square Stock
Admittedly, my thesis will take some time to filter through to the SQ stock price. But it’s also an underreported concept that deserves more attention.
Although we typically consider Japan a tech giant, the country is also happy living a contradiction. As more or less a conservative society, change might be slow. Eventually, though, I think it will occur. When it does, it will hit like a tsunami.
For one thing, Japan is the world’s third-largest economy, and it’s not going to give up that slot easily. Of course, it has a penchant for all things high tech. Finally, the Japanese have adopted cryptocurrency at a much quicker rate than many other nations, suggesting a willingness to try new things.
When Japan does go cashless, it will catch many companies by surprise. Not Square, which knows full well what’s up. Therefore, you should consider getting ahead of this hidden trend, not behind it.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
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