Square (NYSE:SQ) stock has made significant progress in terms of business growth (both organic and inorganic) in the last 12-months.
However, SQ stock has been largely sideways for an extended period. SQ Stock is currently trading at the same levels as it was towards the end of August 2018.
I believe that the stock is likely to break out to the upside in the coming quarters. This article will discuss the business growth triggers that will support that.
Weebly Acquisition Is a Value Creator
Square has been looking at expand outside to United States to tap the big potential in the e-commerce and omnichannel market. Weebly provides a perfect platform for growth in international markets.
On acquisition, Weebly had 625,000 paid subscribers with almost 40% of subscribers outside the United States. This immediately provides Square with global visibility.
The company has already integrated Square with Weebly to launch the “Square Online Store.” The company has integrated the online store with “Square for Retail.” This will allow industry-specific omnichannel solutions for retail sellers.
The outlook is bright. Large retailers would be attracted to a robust omnichannel platform with “end-to-end” service. Merchants with GPV in excess of $500,000 have been increasing for Square. In addition, small business globally can leverage on this platform to expand.
Shopify (NYSE:SHOP) serves as a good example of the business model. The multi-channel commerce platform has registered stellar growth and Shopify stock has skyrocketed. The acquisition and transformation of Weebly to omnichannel commerce can gain similar traction.
Square’s core business remains payment software and hardware. Weebly, however, provides diversification that will help the company make inroads in the international market.
Big Opportunity in Japan for SQ Stock
Square has global growth opportunities, and I believe that Japan is likely to be a key revenue and EBITDA driver.
According to the Ministry of Economy, Trade and Industry (Japan), only 20% of transactions in Japan are through cashless payments. The ministry intends to accelerate it to 40% by 2025.
This presents a big growth opportunity for Square and other companies in financial services. Just to put things into perspective, Japan has 3.8 million small- and medium-size businesses.
Square has already made inroads by partnering with Sumitomo Mitsui Banking Corporation. The 2019 Rugby World Cup and the 2020 Summer Olympics will provide triggers for the company’s growth.
Expansion Into Financial Services
For SQ stock, expansion into financial services is one of the focus areas. The company launched a free business debit MasterCard in January 2019.
The card allows businesses to instantly spend their cash without having to wait for sales proceeds to be deposited in the bank account. This is especially useful for small businesses that work on relatively tight working capital.
It is also important to note that Square made a second application for bank charter in December 2018. If the license is granted, SQ stock will have another upside trigger. Accepting customer deposits and access to other banking services will make Square Inc a comprehensive financial technologies company.
Concluding Words On Square
Square has made the right moves in terms of organic and inorganic growth initiatives. Besides strengthening the omnichannel commerce segment, the company is expanding into financial services.
With global expansion plans, I believe that SQ stock is well positioned for more upside as revenue and EBITDA growth remains robust. The company’s EBITDA margin has also expanded, and as volumes grow, margin expansion can possibly sustain.
Considering the factors of global business potential, end-to-end service offering and potential foray into the banking services, SQ stock is worth accumulating. It wouldn’t be surprising to see a rally soon after a sustained period of stock consolidation.
As of this writing, Faisal Humayun did not hold a position in any of the aforementioned securities.
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