Square Inc. shares are up nearly 6% in Tuesday trading and on track for their highest close in more than 18 months amid some signs of stabilization in the payments universe.
Shares
SQ,
of the payment processor recently changed hands at above $87 and are on pace for their first close above their 2020 closing high of $85.70 that was set on Feb. 20, according to Dow Jones Market Data. The stock is also on track for its highest close since Oct. 5, 2018, when the shares finished the session at $94.11.
New data from Visa Inc.
V,
point to a continued recovery in spending activity, which could come to benefit Square as more states allow businesses to reopen. Visa disclosed in a Monday afternoon filing that total U.S. payment volume was down 5% on a year-over-year basis in May but up 13 percentage points from April levels. Trends improved as the month wore on.
See also: Visa sees ‘massive’ digital acceleration with millions trying e-commerce for the first time
“Many countries are showing spending improvement,” Visa said in the filing, though the recovery in a number of international markets has lagged the U.S. recovery.
Square is mainly focused on the U.S., though it has a small international business in Canada, Japan, Australia, and the U.K.
Square’s stock has proven resilient despite disruptions to its business from COVID-19. The company has heavy exposure to smaller bricks-and-mortar merchants as 48% of its gross payment volume (GPV) in the first quarter came from sellers doing less than $125,000 in annualized GPV. The company warned of a “material impact to our second-quarter results” on its last earnings call.
Don’t miss: PayPal and Square see improvements in April, but Square has a longer road ahead
Yet Square has seen momentum with its consumer-facing Cash App, which people can use to send payments to friends, receive direct deposits, and make in person or online payments with an associated debit card.
The Cash App was already something of a pop culture phenomenon prior to the COVID-19 outbreak, but the pandemic likely drove more people to the app: Square added its largest number of net new transacting active customers in March as the Cash App became a high-profile tool for fundraisers and tipping, and the company saw its highest-ever monthly direct-deposit volumes in April as people opted to get their stimulus payments delivered through the platform.
Read: Stimulus payments spark momentum for Cash App
Analysts have been upbeat about the Cash App in recent weeks though some have expressed caution about the seller portion of the business. UBS analyst Eric Wasserstrom said in a May 21 downgrade that there was limited visibility into the recovery trajectory for the seller business, and Bank of America’s Jason Kupferberg wondered in a May 18 downgrade about the survival rates for small businesses that might still be subject to capacity restrictions and other limitations in the months to come.
Square shares have added 39% over the past month as the S&P 500
SPX,
has gained 8.4%.
Source : MTV
