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What Happened in the Stock Market Today

Stocks wandered sideways on low volume Friday, with theDow Jones Industrial Average (DJINDICES:^DJI)closing up a point and theS&P 500 (SNPINDEX:^GSPC)falling about a quarter percent.

Today’s stock market

Index Percentage Change Point Change
Dow 0.00% 1.11
S&P 500 (0.26%) (7.16)

Data source: Yahoo! Finance.

Industrials were the strongest sector today, with theIndustrial Select SPDR ETF (NYSEMKT:XLI) rising 0.6%.Financials were a drag on the market as long-term rates slipped back after recent gains; theFinancial Select Sector SPDR ETF (NYSEMKT:XLF) dropped 0.8%.

As for individual stocks, Campbell Soup Company (NYSE:CPB) served up a steaming bowl of bad news for its shareholders, and PayPal Holdings (NASDAQ:PYPL) announced it is snapping up a fast-growing retail payments company.

Several overlapping generic stock charts

Image source: Getty Images.

Campbell Soup lands in hot water

Shares of Campbell Soup plunged 12.4% after the company reported disappointing results for its fiscal third quarter, issued a gloomy outlook for the remainder of this year and the next, and announced the sudden departure of its CEO.Sales increased 15% to $2.13 billion thanks to acquisitions, but were flat organically. Adjusted earnings per share were up 19% to $0.70. Analysts were expecting adjusted EPS of $0.61 on sales of $2.14 billion.

On a GAAP basis, the company lost $1.31 per share, thanks largely to a pre-tax impairment charge of $1.65 per she that Campbell took due to “reduced expectation of current and future earnings and cash flows”from its struggling Campbell Fresh unit. Moreover, the $0.70 adjusted EPS includes $0.17 of tax benefit due to the timing of a tax event and will be reversed in Q4.

Impacting the profit numbers was huge 3.9-percentage-point decline in gross margin due to cost inflation and what the company characterized as poor execution. Interim CEOKeith R. McLoughlin said on the conference call that the quarter’s results were unsatisfactory and that the company will undertake a review of strategy, operations, and portfolio, and stated that “everything is on the table.” Looking forward, the company lowered full-year adjusted EPS guidance to a range of $2.85 to $2.90 from the previous outlook of $3.10 to $3.17.

To make things even worse, Campbell surprised analysts by saying it now expects the Snyder’s-Lance acquisition to be dilutive to earnings in 2019.

There just simply wasn’t any good news in this report at all, so it’s not surprising investors dumped shares today.

PayPal snaps up European retail payment company

PayPal made a move into international in-store payment systems for small businesses when it announced today that it was acquiring Swedish financial technology start-up iZettle in a $2.2 billion cash deal. Investors bid up PayPal’s stock 2% on the news.

iZettle, founded in 2010, sells a point-of-sale payment system and merchant tools in 10 countries in Europe and in Brazil and Mexico. It has grown rapidly, handling an estimated $6 billion total payment volume in 2018, and expects to generate $165 million in gross revenue this year. The company is not profitable, but PayPal expects the business to haveEBITDA profitability by fiscal 2020. iZettle’s founders and management team will join PayPal.

“Small businesses are the engine of the global economy and we are continuing to expand our platform to help them compete and win online, in-store and via mobile,” saidPayPal CEODan Schulman. “iZettle andPayPalare a strategic fit, with a shared mission, values and culture — and complementary product offerings and geographies.”

The acquisition is not cheap, at a multiple of 11 times estimated 2019 revenue, according to PayPal.But it is an excellent strategicmove, posing a significant challenge to Squaredown the road.

Strong Quarter Affirms the Bull Thesis for Tencent Holdings Stock

Chinese internet giant Tencent Holdings/ADR (OTCMKTS:TCEHY) just reported first quarter numbers, and they were much better than expected. Revenue growth remained robust, while earnings came in well above expectations, easing concerns surrounding persistent margin-compression headwinds. As a result, Tencent stock traded more than 6% higher to just over $53.

But Tecent earnings are more than just a near-term catalyst for a jump in TCEHY stock. Tencent earnings affirm the bull thesis that Tencent stock is worth a lot more than just $50 and change.

Indeed, given the company’s exposure to multiple nascent hyper-growth markets, I think Tencent stock is worth at least $60. As such, I think this post-earnings rally in Tencent has a lot of firepower left.

Here’s a deeper look:

Tencent Is a Big Growth Company

Tencent is often labeled as China’s Facebook Inc (NASDAQ:FB) because of its massive WeChat and Weixin user base, which crossed the billion user mark for the first time ever this past quarter (up 11% year-over-year).

That is a reasonable and flattering comp, as Facebook is a big growth company with a powerful advertising business. Tencent, too, has a really strong advertising business that is growing at a comparable rate (both Facebook and Tencent reported roughly 50% ad revenue growth this past quarter).

On that basis alone — that Tencent is China’s Facebook with a huge and growing advertising business — Tencent is a big growth company.

But Tencent is also much more than just China’s Facebook. In many senses, it is also China’s YouTube, China’s Spotify Technology SA (NYSE:SPOT) and China’s Paypal Holdings Inc (NASDAQ:PYPL). Plus, Tencent operates a red-hot online gaming business and an equally hot cloud business.

Those businesses are also growing at robust rates. Value-added-services revenue, which is mostly from online gaming and music and video subscriptions, rose 34% last quarter. Meanwhile, other revenues, which is mostly cloud and payment revenues, more than doubled last quarter.

Clearly, this is a very big growth company with multiple growth drivers and broad-based exposure to the Chinese consumer.

Because of this broad-based exposure, Tencent stock really is just a pure play on the continued boom in China consumerism. Considering per capita spending in China is 15% as big as per capita spending in the U.S., the most likely path forward for China consumerism is upward and outward.

Tencent Stock Is Materially Undervalued

Tencent stock bears want to pound on the table about margin compression headwinds. While it is true that margins are in retreat, this is simply a near-term and naturally occurring phenomena of a hyper-growth company.

In order to dominate a market (or multiple markets), you need to invest big, run on lower margins, and win over customers quickly. Then, once you’ve dominated the market, you curtail spending and ramp up margins. Amazon.com, Inc. (NASDAQ:AMZN) and Netflix, Inc. (NASDAQ:NFLX) executed this exact strategy, and it is working out really well for both of them.

In other words, margins will be depressed here and now, but not forever. And when they ramp back up, they will ramp back up on a much larger revenue base, implying huge profit growth.

Consequently, I think earnings growth will be quite robust in a 5-year forward window. With revenues growing at a 50% and only marginally slowing rate, I think it is fairly likely that TCEHY grows revenues by at least 30% per year over the next 5 years. Meanwhile, net profit margins, which currently hover around 26%, may compress further, but should stabilize around 25% in the long-term, as big investments moderate.

That combination of 30% revenue growth and 25% net profit margins leads me to believe that TCEHY can net about $3.75 in earnings per share in 5 years. A Facebook-like forward multiple of 25 on those $3.75 earnings implies a four-year forward price target of nearly $94. Discounted back by 10% per year, that equates to a present value in the low to mid $60’s.

Bottom Line on TCEHY Stock

Near-term, this is a big revenue growth company with margin issues. Long-term, those margin issues will be resolved, and this will turn into a big revenue growth company with big earnings growth.

Tencent stock still isn’t priced appropriately considering its significant growth prospects. Consequently, this stock should continue to outperform over the next several quarters.

As of this writing, Luke Lango was long TCEHY, FB, AMZN, and PYPL. 

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Quantum Capital Management Decreases Holdings in PayPal (PYPL)

Quantum Capital Management lessened its stake in shares of PayPal (NASDAQ:PYPL) by 37.4% during the first quarter, according to the company in its most recent disclosure with the SEC. The fund owned 5,076 shares of the credit services provider’s stock after selling 3,032 shares during the quarter. Quantum Capital Management’s holdings in PayPal were worth $385,000 as of its most recent SEC filing.

Other hedge funds and other institutional investors also recently bought and sold shares of the company. Cigna Investments Inc. New lifted its holdings in shares of PayPal by 1.4% during the fourth quarter. Cigna Investments Inc. New now owns 47,106 shares of the credit services provider’s stock worth $3,468,000 after purchasing an additional 641 shares during the period. Waldron LP lifted its holdings in PayPal by 16.9% in the fourth quarter. Waldron LP now owns 4,467 shares of the credit services provider’s stock valued at $328,000 after buying an additional 646 shares during the period. Comerica Securities Inc. lifted its holdings in PayPal by 3.7% in the first quarter. Comerica Securities Inc. now owns 18,987 shares of the credit services provider’s stock valued at $1,441,000 after buying an additional 673 shares during the period. Loring Wolcott & Coolidge Fiduciary Advisors LLP MA lifted its holdings in PayPal by 13.8% in the fourth quarter. Loring Wolcott & Coolidge Fiduciary Advisors LLP MA now owns 5,760 shares of the credit services provider’s stock valued at $424,000 after buying an additional 700 shares during the period. Finally, Bfsg LLC lifted its holdings in PayPal by 19.2% in the fourth quarter. Bfsg LLC now owns 4,479 shares of the credit services provider’s stock valued at $330,000 after buying an additional 722 shares during the period. 80.88% of the stock is currently owned by hedge funds and other institutional investors.

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PYPL has been the topic of several recent analyst reports. Jefferies Group boosted their target price on shares of PayPal from $86.00 to $95.00 and gave the company a “buy” rating in a report on Thursday, January 18th. Sanford C. Bernstein initiated coverage on shares of PayPal in a report on Tuesday, March 27th. They issued a “market perform” rating and a $82.00 target price on the stock. Nomura boosted their target price on shares of PayPal to $97.00 and gave the company a “buy” rating in a report on Thursday, March 15th. Credit Suisse Group restated an “outperform” rating and issued a $91.00 target price (up previously from $85.00) on shares of PayPal in a report on Wednesday, January 17th. Finally, Zacks Investment Research lowered shares of PayPal from a “buy” rating to a “hold” rating in a report on Monday, February 5th. One equities research analyst has rated the stock with a sell rating, eight have given a hold rating and thirty-four have assigned a buy rating to the stock. PayPal has an average rating of “Buy” and an average target price of $80.91.

PayPal opened at $78.81 on Tuesday, according to MarketBeat. The stock has a market capitalization of $94.04 billion, a price-to-earnings ratio of 56.70, a P/E/G ratio of 2.62 and a beta of 1.28. PayPal has a twelve month low of $78.45 and a twelve month high of $79.63.

PayPal (NASDAQ:PYPL) last released its earnings results on Wednesday, April 25th. The credit services provider reported $0.57 earnings per share for the quarter, beating the Zacks’ consensus estimate of $0.54 by $0.03. The firm had revenue of $3.69 billion for the quarter, compared to analysts’ expectations of $3.59 billion. PayPal had a net margin of 13.92% and a return on equity of 12.35%. The company’s quarterly revenue was up 23.9% on a year-over-year basis. During the same period in the previous year, the company earned $0.44 earnings per share. equities research analysts anticipate that PayPal will post 1.71 EPS for the current year.

In related news, EVP Aaron Karczmer sold 7,578 shares of the company’s stock in a transaction that occurred on Friday, February 16th. The shares were sold at an average price of $77.88, for a total transaction of $590,174.64. Following the sale, the executive vice president now directly owns 23,598 shares in the company, valued at approximately $1,837,812.24. The sale was disclosed in a filing with the Securities & Exchange Commission, which is accessible through this link. Also, insider Daniel H. Schulman sold 26,000 shares of the company’s stock in a transaction that occurred on Wednesday, February 28th. The shares were sold at an average price of $80.66, for a total transaction of $2,097,160.00. Following the sale, the insider now owns 268,189 shares in the company, valued at $21,632,124.74. The disclosure for this sale can be found here. Over the last quarter, insiders sold 219,773 shares of company stock worth $16,777,061. Corporate insiders own 0.20% of the company’s stock.

PayPal Profile

PayPal Holdings, Inc operates as a technology platform company that enables digital and mobile payments on behalf of consumers and merchants worldwide. Its payment solutions include PayPal, PayPal Credit, Braintree, Venmo, Xoom, and Paydiant products. The company's platform allows consumers to shop by sending payments, withdraw funds to their bank accounts, and hold balances in their PayPal accounts in various currencies.

Institutional Ownership by Quarter for PayPal (NASDAQ:PYPL)

Largest Korean Exchange Raided, Economist Rips Cryptos

The cryptocurrency market closed out a lackluster week with a day of heavy selling on Friday, with most major currencies trading down more than than 6 percent. Here’s a look at some of the headlines that were moving the cryptocurrency market today — and which currencies were on the move.


Korean authorities raided the offices of cryptocurrency exchange UpBit on Thursday and Friday. UpBit, which is the largest Korean cryptocurrency exchange and the fourth largest in the world, said on its website it's “under investigation by prosecutors and is cooperating.”

According to a report by Cheddar, Facebook Inc. (NASDAQ: FB) is seriously considering developing its own cryptocurrency. Earlier in the week, Facebook launched a new blockchain team led by former Messenger head and Paypal Holdings Inc. (NASDAQ: PYPL) executive David Marcus but didn't provide details on the goals of the team.

Economist Nouriel Roubini, who gained notoriety for predicting the 2008 financial crisis, blasted cryptocurrencies at the Fluidity Summit in Brooklyn. Roubini said cryptocurrencies create “chaos” in the payments business and are “totally inefficient” and “never going to work.” 

Price Action

The Bitcoin Investment Trust GBTC (OTC: GBTC) traded at $13.88, down 4.8 percent.

Here’s how several top crypto investments fared Friday. Prices are as of 3:30 p.m. ET and reflect the previous 24 hours.

Bitcoin declined 5 percent to $8,671;
Ethereum declined 6.7percent to $691;
Ripple declined 9.7 percent to 70 cents;
Bitcoin Cash declined 9.9 percent to $1,418;
EOS declined 14.4 percent to $15.34.

The three cryptocurrencies with at least $1-million market caps that have made the biggest gains over the past 24 hours are:

BunnyCoin: $2.4-million market cap, 122.9-percent gain.
InflationCoin: $1.1-million market cap, 38.4-percent gain.
BitTokens: $1.0-million market cap, 26.7-percent gain.

The three cryptocurrencies hit hardest in the past 24 hours were:

LiteDoge: $1.6-million market cap, 35.7-percent decline.
PeepCoin: $2.2-million market cap, 32.5-percent decline.
Rubycoin: $15.1-million market cap, 30.5-percent decline.

Related Links:

Today In Cryptocurrency: Bank Of America Calls Cryptos 'Troubling,' Fundstrat Predicts $64,000 Bitcoin Price

Despite Riot Blockchain's Risks, HC Wainwright Emerges As A Bull

A Facebook Cryptocurrency? Company Acknowledges Exploration Of Blockchain Technology

Facebook, Inc. (NASDAQ: FB) declined to comment Friday on reports the social media platform is considering a cryptocurrency to enable electronic payments.

“Like many other companies, Facebook is exploring ways to leverage the power of blockchain technology,” a Facebook spokesperson said in a statement. “This new small team will be exploring many different applications. We don’t have anything further to share.”

Facebook remarked only on its blockchain ventures, which were announced earlier this week, but did not confirm a Cheddar report on a more focused interest in financial applications.

“They are very serious about it,” Cheddar’s sources said of Facebook’s alleged cryptocurrency exploration.

Some speculated a cryptocurrency end goal after Facebook’s David Marcus announced his transition from heading Messenger to spearheading a new blockchain-focused team. Marcus is a former PayPal Holdings Inc (NASDAQ: PYPL) president who now serves on the board of Coinbase, a crypto exchange.

A number of other worthy applications exist for blockchain at Facebook, according to an IBM Common Stock (NYSE: IBM) executive.

"So what they are grappling with is securing data, and making sure that if people want privacy or trackability of their data, they can actually secure that  —whether it’s on the ad side or the personal side,” Bridget van Kralingen, IBM’s senior vice president of global industries, platforms and blockchain, said on Fortune’s "Balancing the Ledger" show.

“It’s a technology that fits very well with some of the business model challenges that they’re actually facing, and I think they’re very right to take this very seriously.”

Related Links:

Today In Cryptocurrency: Bank Of America Calls Cryptos 'Troubling,' Fundstrat Predicts $64,000 Bitcoin Price

What Are Facebook And Google Building? A Look At The Tech Giants' R&D Spending

Can PayPal Holdings Inc Overcome Its Sophomore Slump?

Currently, PayPal Holdings Inc (NASDAQ:PYPL) is a walking contradiction. Last year, PayPal stock nearly gained a massive 83% in the markets, quickly silencing its critics. However, this year, the critics are back and for good reason. Year-to-date, PYPL has moved up only a little over 1%. With the performance it just delivered, this is the very definition of pedestrian.

In my most recent write-up of PayPal stock, I cautioned that while the company itself is brilliant, it’s probably due for a breather. Technically, I wasn’t impressed with what appears to be a bearish head-and-shoulders formation. On top of that, we’re suffering extreme sentiment swings in the broader markets: you never know if the next day is the long-dreaded correction.

Since my article was published, the PYPL stock price has gained less than 1%. But even if shares were up 10%, I’d still remain tactically cautious. Even this year’s high-flyers like Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN) had a forgettable month in March. Moreover, the events that caused these weaknesses are yet to be resolved.

While I love PayPal stock for the long haul, I’ll gladly concede that you can’t ride this perpetually without hiccups. Nothing, not even the blockchain concept, is above market psychology. And realistically, we’re likely going to hit a rough patch. In addition, PYPL is a young, standalone investment.

It will more than likely incur a “sophomore slump,” especially at this juncture.

PayPal Stock Is Due for a Correction

It’s a concept that long-side investors don’t like talking about, but it’s just plain reality: what goes up must come down. Without traders willing to stake both sides of the argument, a healthy market cannot exist. So yes, it stinks, but a downside is ultimately positive for PayPal stock.

The other point is that a correction is guaranteed to occur. Mind you, I’m not guaranteeing the time frame; the PYPL stock price could charge higher from here, and make me look like a fool. That’s the risk I have to take in this industry. But history proves that no company can ever produce a perfect record.

PayPal stock, performance comparisons

Let’s consider eBay Inc (NASDAQ:EBAY), from which PayPal split. Like the most elite tech names, eBay sparked a business revolution. In this case, the company brought auctioning to the internet, and neither auctioning or the internet were the same since.

True to form, eBay rocked the markets in its first complete year in 1999, returning 56.5%. However, in 2000, it suffered a devastating 53% loss.

Another example is Amazon. Perhaps no other company has impacted the retail market like Amazon, and its blistering first-complete year in 1998 proved it. Shares rocketed up nearly 980%, and followed that up with a respectable 29% performance in 1999. The hammer dropped, though, in the following year, where the company lost almost 83%. In 2001, Amazon lost another 22%.

Now look at PayPal stock. In its first complete year in 2016, it gained a respectable 13.6%. The following year, it enjoyed its breakout moment, delivering 83% for shareholders. But this is also coming at a time when prior revolutionary tech names suffered their first real setback.

Every company is different, of course, but I don’t think PYPL will buck the trend.

Be Careful Is All I’m Sayin’

Before you get out the pitchforks, let me again reiterate that I’m long-term bullish on PayPal stock. All the things that brought you to this name in the first place are still relevant. Plus, with the emergence of the blockchain and cryptocurrencies, it’s clear that people are seeking alternative payment platforms.

With that said, every new technology encounters hiccups before they’re truly accepted into the mainstream. So my advice is simple: Be confident, but also be realistic. If eBay and Amazon couldn’t escape their adolescent growing pains, I don’t think PYPL will either.

Sure, the former two companies had their adolescence coincide with the tech bubble collapse. But it’s not as if PayPal stock has a smooth ride ahead of it either. Should the China tariff issue or other geopolitical flashpoints go awry, trouble will come in a hurry.

In the long run, I genuinely believe that PYPL will resume its brilliant campaign. But for right now, this is a great time to take profits and reevaluate. If anything, it will provide you with an opportunity to get a great company at an even greater discount.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

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Can Alexa Take on Venmo?

Venmo, the person-to-person payment app owned by PayPal (NASDAQ:PYPL), has been the payment provider’s rising star since it was acquired along with Braintree in 2013. Venmo is extremely popular with millennials, who find the app particularly useful for splitting shared costs like a restaurant bill, rent, and utilities. The app has become so popular it has achieved verb status, with younger users saying, “just Venmo me.”

Last year, Venmo’s payment volume increased 97% year over year to $35 billion.That success has attracted a wide variety of potential competitors, the most notable beingSquare Cash, Apple Pay Cash, and Zelle, a payment method floated by a consortium of 30 major U.S. banks.

While each of these offerings made inroads, Venmo’s biggest challenge may be yet to come.

The Venmo app on a smartphone with Chinese takeout in the background.

Amazon is on the hunt, with Venmo in the cross hairs. Image source: PayPal.

The big leagues

E-commerce juggernaut Amazon.com(NASDAQ:AMZN) is reportedly mulling a person-to-person payment feature using its Alexa-powered smart devices as a starting point, according to a report in The Wall Street Journal (paywall). The company is considering a number of options that would allow customers to send money to friends using its digital assistant, which acts as the software to the Echo’s hardware.

If true, this would be the latest move by Amazon to enter the realm of personal finance. After initially adding a store-branded credit card, the company has expanded its initiatives to include its own digital wallet — Amazon Pay. The company has since introduced the Amazon Payment Global Partner Program, which allows online merchants to offer Pay with Amazon at checkout.The company has also been in talks with big banks to offer its customers a checking account-like product.

The voice-activated Echo has proven to be a boon to Amazon. Customers that own the smart speaker spend 66% more, on average, than those without the device.Amazon claims that subscribers to its unlimited streaming music service have doubled in the past six months, driven by two interrelated factors: the expanding number of members of it Prime loyalty program and the exploding popularity of voice-activated Echo smart speaker.The ability to send payments could make the device even more useful to its customers.

White Amazon Echo Dot on a table next to house keys.

Is Alexa a match for Venmo? Image source: Amazon.

PayPal has cracked the code

While the popularity of the platform among younger customers is undisputed, there were no charges to users for their peer-to-peer transactions — so until recently, PayPal hadn’t made any money from Venmo. That changed late last year when PayPal rolled out Pay with Venmo, which allowed its users to pay merchants using the Venmo app. Merchants accepting the payment method will pay the standard transaction fee to PayPal, which will provide the company with a largely untapped revenue stream.

The amalgamation of payment service and communal platform has captivated millennials, who have grown up in the era of social media. The ability to transfer money, include payment descriptions, and top it off with an emoji may seem frivolous to older consumers, but the intersection of financial utility and social interaction make it a perfect fit for younger users. This combination, and the entrenched nature of the app among friends, is part of the appeal for these consumers, and why it will be difficult to unseat Venmo as the app of choice — at least for now.

Two hands holding a smartphone typing a message into the Venmo app.

Millennials prefer the social aspect of Venmo to other payment apps. Image source: PayPal.

David and Goliath

While Amazon has been enormously successful in many of its endeavors, the company isn’t invincible. If you have any doubts, consider the company’s foray into smartphones, the Fire Phone, which is likely Amazon’s biggest flop to date. The devices were so unpopular that the company took a $170 million charge for the unsold phones just three months after they debuted.

Another great example is Shopify Inc.,an e-commerce company that helps small- and medium-sized businesses set up and manage an online store. After competing for a time using its Webstore platform, Amazon shuttered that business and threw its support behind its former competitor, sending its users to Shopify.

It’s also worth noting that Amazon debuted a similar payment service back in 2007 called WebPay, which allowed customers to send money to friends for free — sound familiar? That service failed to catch on, and the company discontinued it in 2014.

For now, this is merely supposition and rumors. Amazon could introduce a competing payment service, but even if it does, there are no guarantees it will succeed.While the situation certainly bears watching, I don’t think PayPal investors having anything to worry about — at least not for the foreseeable future.

Dont Worry: The Square Inc Stock Rally Is the Real Deal

In today’s market, Square Inc (NYSE:SQ) is an anomaly: a technology firm that’s performing very well. On a year-to-date basis, Square stock is up nearly 42%, a resounding triumph amid a sea of disappointment. In contrast, competitors in the payment apps industry, such as Paypal Holdings Inc (NASDAQ:PYPL) and Apple Inc. (NASDAQ:AAPL), are decidedly muted.

Naturally, investors wonder if such momentum can last. I’m cautiously optimistic that it will. Unlike Apple, which has multiple and disparate businesses, SQ stock is a substantially more focused investment. And while PayPal is the dominant player in the online payment app arena, Square has the edge in providing a comprehensive solution for small businesses.

Of course, I don’t want to discount the pain in the broader markets, which has negatively impacted Square stock. For instance, the entire tech sector softened from mid-March due to several pessimistic catalysts, most notably the Tesla Inc (NASDAQ:TSLA) and Uber driverless technology controversies. In Square’s case, shares are down nearly 15% since the March 20 close.

At the same time, investors pushed up SQ stock for a reason. In fact, every indicator existed to run away from the markets, even from solid names. That just didn’t happen for SQ, which tells me that the positives outweigh the negatives.

Importantly, it’s not speculative optimism after which Wall Street chases. Small business sentiment is one of the bright spots this year, with entrepreneurs expecting more revenues and growth opportunities. Also, they’re reporting less difficulty in obtaining financing.

Naturally, this rising trend is a big boost for Square stock. But I’m even more intrigued with the finer details.

Square Stock Deserves Its Winning Ways

As I mentioned previously, the biggest advantage to using Square is its comprehensive platform. For signing up, you get a free credit card reader, which makes in-person transactions a snap. Along with that, you receive inventory management programs, as well as other administrative applications. It’s easily the best choice if you run a traditional business.

While rival PayPal maintains the edge for online businesses, the reality is that older generations are more entrepreneurial. small business owner demographics, Square stockSure, the hoodie-wearing hipster is the commonly portrayed image of the modern business owner. But the actual statistics state that 33% of small business owners are between 50 to 59 years old. Hoodie-wearers, or those between 18 and 29, represent a mere 4%.

It’s not much of a stretch to assume that older business owners prefer SQ. After all, these are folks that actually want to talk to their customers – not text them emojis. Square has the tools, comprehensiveness, and simplicity that most small entrepreneurs crave. We shouldn’t be surprised, then, how dominant Square stock is in the markets.

Also unsurprising is that in-person or traditional businesses are rapidly adopting mobile payment apps. According to an October 2017 survey, small business owners were more likely to integrate in-person mobile payments than they were to integrate online payment processing platforms.

This trend contradicts the common perception that companies are exclusively focusing on the online experience. Since most small business owners are older, Square has a much more viable market than analysts give them credit for. Again, chalk that up as a win for SQ stock.

Technicals Confirm the Fundamentals

Sometimes, we encounter situations where a fundamentally sound company experiences market distress. Perhaps investors haven’t quite digested the organization’s true potential, and share prices lag as a result. This is not at all the case with SQ stock.

Since the early summer of 2016, SQ has formed a consistently rising bullish trend channel. In addition, the 50 day moving average has supported the overall price action. I expect this trend to hold up, especially because the fundamentals are so strong.

With that said, my main caveat is the broader market weakness. It could continue to pressure even solid companies with great fundamentals, which is why I’m not completely gung-ho.

Ultimately, though, the longer-term picture is what you want to focus on. Consider initiating a small position in Square stock now, and start building up should prices decline. In a year or two from now, you’ll be glad you did.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

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