Square Inc (NYSE:SQ) continues to test the patience — and nerves — of investors. After putting together a decent rally in May, SQ stock has been sliding again in June. On Thursday, shares closed at $211.43 for a 4% loss on the day. After an impressive growth run in 2020, Square has been volatile in 2021, swinging from an all-time high close in February to a 2021 low in May. In between, it’s been up and down, punctuated by multiple single-day swings of 8% or more.
With this degree of volatility, is now the time to consider investing in SQ stock? On the plus side, shares are now going for 3.6% less than they were to kick off the year. And they’re down 24% from February’s record high close. This is a Portfolio Grader “B” rated company, so it’s a pretty safe bet to deliver on long-term growth. Over the past five years, SQ stock has appreciated by an impressive 2,250%. That’s despite this year’s drama. On the negative side, buying SQ now might mean watching your investment shrink in value in the short term.
SQ Stock Drops As Bitcoin Continues to Spook Investors
As I wrote about Square several days ago, the stock has been infused with a high degree of volatility because of its embrace of Bitcoin (CCC:BTC-USD). Square doesn’t just allow users to buy and spend Bitcoin, the company is investing in the cryptocurrency itself. A big part of that spectacular February performance was due to the company’s Bitcoin holdings. The company bought $50 million in Bitcoin last October. At the time, Bitcoin was priced just under $11,000 but by February 19 — when SQ hit is peak — the value of a Bitcoin had topped $56,000.
Square’s crypto strategy looked genius at that time. However, the company bought another $170 million worth of Bitcoin in February. Since then, the price of Bitcoin has plummeted, dropping to the $34,000 range in May. With Bitcoin fluctuating in value, SQ stock has gone along for the ride.
Summer Festival Season and Return of Craft Fairs Good News for Square
Bitcoin is a big part of the SQ stock volatility that might scare off investors. However, there is some good news for the company that might make it worthwhile putting up with the Bitcoin nonsense.
The pandemic last year resulted in the cancellation of an entire year’s worth of festivals, flea markets and arts and crafts shows. These gatherings have become a hotspot of Square payment activity. Vendors using Square readers attached to their smartphones are able to take credit card payments instead of being forced to rely on cash.
With the country opening up, these events are beginning to return. Even better, after a year of being relegated largely to online shopping, consumers want to get out of the house and they are in a spending mood. This summer’s festival season is shaping up to be a profitable one for vendors. Flea markets will be booming. And people are expected to be snapping up arts and crafts, especially as we head into fall and holiday shopping starts. When these vendors make money, Square makes money.
Bottom Line on SQ Stock
So, is SQ stock a buy? Time for one last gut check. The 44 investment analysts with Square coverage tracked by the Wall Street Journal give SQ a consensus “Overweight” rating. They have an average 12-month price target of $280.41, which is well over the stock’s record February close. It represents more than a 30% upside from the current price.
Whether this feels like an opportunity or not really depends on your tolerance for volatility. The return of summer festivals and craft shows combined with pent-up consumer spending bodes well for Square. But that’s countered by the continued association with Bitcoin. However, even in that case, the current negative could quickly swing back to being a big positive if Bitcoin prices recover.
Whatever happens expect continued volatility in SQ stock pricing for now, but with solid long-term growth prospects. And make your decision accordingly.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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