Yahoo Finance Square (SQ) Gains Solid Seller Momentum With PPP Support
Square, Inc. SQ is rapidly gaining steam on the back of the Paycheck Protection Program (PPP), which was recently created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Notably, PPP is an extension of the Small Business Administration 7(a) loan program that allows financial institutions to provide federally-backed, forgivable loans to the small businesses.
Square thatbegan to process Payroll Protection Program applications on Apr 29 via Square Capital, has facilitated PPP loans worth more than $820 million as of Jun 10.
This has strengthened the company’s momentum across small businesses or sellers, which remains crucial for business growth.
We note that Square Capital has provided financial support to over 76,000 such businesses on the back of stimulus funds under PPP.
Growing Lending Activities
Square is witnessing a boost in its lending activities owing to the growing demand for stimulus funds on account of the coronavirus (COVID-19)-induced widespread economic disruptions.
Since Apr 29, Square Capital has processed PPP loans equivalent to the amount of business loans it would process in four and half months under normal circumstances, to date.
Thus introduction of PPP has strengthened the company’s lending business. This, in turn, is expected to contribute to the top line.
Further, PPP has expanded its reach to new businesses or sellers. Notably, 60% of the PPP applicants received loans via Square Capital for the first time.
We believe growing momentum across small businesses will expand the company’s seller base, which remains its key catalyst.
Square capital is experiencing solid momentum across non-employer firms, which have applied for 50,000 loans in total for $290 million. Further, growing traction among the employer firms that have applied for 26,000 loans in total for $530 million is a positive.
Moreover, the company witnessed solid traction across the beauty and personal care, and food and drinkbusinesses owing to growing need for stimulus funds.
Additionally, strong momentum across Square Payroll customers remains encouraging.
Intensifying Competition
The introduction of PPP has intensified competition among the online payment companies and online financial solutions providers.
Apart from Square, companies like PayPal PYPL and Jack Henry & Associates JKHY have also taken part in PPP to help the COVID-19 impacted small businesses.
Notably, PayPal started providing access to the PPP loans after receiving approval from the U.S. Small Business Administration in the beginning of second-quarter 2020.
Further, Jack Henry launched a PPP loan solution, which allows banks and credit unions to support PPP by enabling small and medium businesses to upload the required documents and other information online securely.
Nevertheless, Square’s comprehensive commerce ecosystem that helps sellers to start, run and grow their businesses efficiently remains vital. It is likely to continue aiding the company in attracting sellers to its platform.
Zacks Rank & a Stock to Consider
Currently, Square carries a Zacks Rank #3 (Hold).
A better-ranked stock that can be considered in the broader technology sector is Chegg, Inc. CHGG which flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Chegg is currently pegged at 30%.
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Click to get this free report Jack Henry Associates, Inc. (JKHY) : Free Stock Analysis Report Chegg, Inc. (CHGG) : Free Stock Analysis Report PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report Square, Inc. (SQ) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research
