Square's best growth days could be far from over
Digital payments stock Square, Inc. (NYSE:SQ) has been a long-time favorite in this space. The company's list of platforms also includes Cash App and Tidal, and yesterday announced a major partnership with TikTok which introduces a new integration that will make it easy for sellers to reach new customers and grow their online sales. As TikTok hits 1 billion users, linking the two popular programs seems like the rare win-win in the investing world.
Square stock is up almost 10% in 2021, and boasts a 44.5% lead in the last 12 months. However, SQ has been hit by September seasonality hard, to the tune of a 11% haircut this month. Whenever the stock does find a bottom though, a short squeeze could help fuel a bounce. Almost 10% of SQ's total available float is sold short, and at the stock's average pace of trading, it would take a whole week for shorts to buy back those bearish bets.
From a fundamental point of view, Square has experienced incredible top- and bottom-line growth in recent years, concurrent with SQ's valuation also running up significantly. Square stock currently trades at a massive price-earnings ratio of 219.04. However, SQ also has a forward price-earnings ratio of 109.89 which is still an extremely high value, but indicates that strong earnings growth is expected for SQ.
Square has also managed to grow its revenues 620% and increase net income by $636 million since fiscal 2017. Overall, Square stock is undoubtedly one of the most exciting growth plays in the market right now and SQ will likely continue trading at a rich valuation in the coming years.