Could Square Be a Millionaire Maker Stock? | The Motley Fool

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Key Points

Through the end of November, Square stock was up nearly 250% in 2020, and the company had a market cap of $94 billion.
Through the first nine months of the year, Square’s bitcoin revenue was $2.82 billion, compared with just $339 million in the same period of 2019.
Bitcoin doesn’t generate profit for Square, but it does encourage more frequent use of its Cash App — which is quickly growing both the top and bottom lines for Square.

Our experts issued a rare “Double Down” Buy alert on this one stock… Learn more.

One of the best times to invest in a company is as it makes its transition from all-out growth (a young business where sales are the primary driver of stock price) to profitable growth (when the company starts reaching a more efficient scale and the bottom line starts to expand). This is the leg of the journey Square (NYSE:SQ) is beginning to find itself on.

Even though 2020 has been a difficult year for its merchant services business due to the pandemic, Square’s consumer-facing Cash App is paying off in a big way. Shares are up nearly 250% so far in 2020, valuing Square at a market cap of some $94 billion. It may not be a small stock with the promise of potentially life-changing returns anymore, but it could nevertheless add some serious growth to investor portfolios over the next decade.

A woman holding a smartphone and credit card.

Image source: Getty Images.

A solid bet on a “normalizing” economy

Historically, Square is a financial services and digital payments company servicing small- and mid-sized businesses. The economy going into lockdown back in the spring of 2020 should have been a recipe for disaster for this segment, and indeed share prices did briefly tank by more than 50% in late February and early March as worry over the health of the most vulnerable businesses in the economy mounted.

But the stock came roaring back with a vengeance. Small companies’ ability to quickly pivot to online sales was underestimated. While Square’s “seller ecosystem” segment has been far from perfect, it hasn’t been an unmitigated disaster either. In fact, Square itself is partly responsible for helping its customers roll with the punches and adapt to the new digital-first reality that was foisted upon them.

Metric	Q1 2020	Q2 2020	Q3 2020
“Seller ecosystem” revenue	$853 million	$723 million	$965 million
YOY change	16%	(17%)	5%
“Seller ecosystem” gross profit	$356 million	$316 million	$409 million
YOY change	18%	(9%)	12%

YOY = year-over-year. Data source: Square.

Square’s merchant-facing services returning to growth in the summer months was great news, and there’s plenty of room for even further rebound here. As the economy finds its footing again, the myriad of companies leaning on these payments and financial management tools should see an uptick…