Square tumbles into earnings – here’s why it’s still a long-term bet

Square is getting crushed ahead of its earnings report.

The stock fell more than 5% on Thursday afternoon heading into the company's after-the-bell release. PayPal, which posted a blowout quarter on Wednesday, was also under pressure.

Square, a payments app company, is expected to report 17 cents a share in profit, according to FactSet, swinging from a loss of 2 cents a share in the same March-ended quarter last year. Forecast sales of $3.3 billion would mark more than 140% growth.

Despite the day's weakness, one strategist said it's poised to continue to benefit from high demand.

"This company fits squarely in the middle of the technological transformation that's happening within our society. They were able to pivot, adapt and grow during this pandemic, even though small businesses weren't using their app," Michael Bapis, managing director at Vios Advisors at Rockefeller Capital, told CNBC's "Trading Nation" on Thursday. "We believe there's still upside to go."

The shares have fallen nearly 23% from a February record high, but remain more than 220% off a low last May.

"They have quality management, a very high customer satisfaction rate. And we think this Cash App will continue to drive cash flow in the foreseeable future as our whole society continues with this transition and fintech companies can only get stronger as we move forward," Bapis said.

Todd Gordon, founder of TradingAnalysis.com, says Square may be unfairly punished by a rotation out of tech and growth stocks. However, he also views the stock as a long-term play and sees potential in its crypto holdings and offerings.

"They have a strong crypto offering which you really need to focus on, peer-to-peer payments, and they're really encouraging investing within their ecosystem which is Cash App," Gordon said during the same interview. "It's the top 10 most downloaded app so it's got a really broad ecosystem of banking, investment, spending."

Payment companies such as Square and PayPal have opened up their platforms to cryptocurrency transactions. In fiscal 2020, Square reported $4.57 billion in bitcoin revenue – the company has also bought bitcoin, 5% of total assets at the end of 2020.

On the charts, Gordon highlighted $215 a share as a band of support for the stock. Square traded Thursday afternoon at $219.

Disclosure: Vios is long Square.


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