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Square Reports Blowout Quarter — Here's Why It's a Long-Term Bet

Source: Square

Square was volatile in extended trading even after a blowout quarter.

The payments company, reported first-quarter earnings of 41 cents a share, well above the FactSet estimate of 17 cents. Revenue of $5.06 billion also came in above expectations.

Despite the day's weakness, one strategist said it's poised to continue to benefit from high demand.

"This company fits squarely in the middle of the technological transformation that's happening within our society. They were able to pivot, adapt and grow during this pandemic, even though small businesses weren't using their app," Michael Bapis, managing director at Vios Advisors at Rockefeller Capital, told CNBC's "Trading Nation" on Thursday. "We believe there's still upside to go."

The shares have fallen nearly 21% from a February record high, but remain more than 230% off a low last May.

"They have quality management, a very high customer satisfaction rate. And we think this Cash App will continue to drive cash flow in the foreseeable future as our whole society continues with this transition and fintech companies can only get stronger as we move forward," Bapis said.

Todd Gordon, founder of TradingAnalysis.com, says Square may be unfairly punished by a rotation out of tech and growth stocks. However, he also views the stock as a long-term play and sees potential in its crypto holdings and offerings.

"They have a strong crypto offering which you really need to focus on, peer-to-peer payments, and they're really encouraging investing within their ecosystem which is Cash App," Gordon said during the same interview. "It's the top 10 most downloaded app so it's got a really broad ecosystem of banking, investment, spending."

Payment companies such as Square and PayPal have opened up their platforms to cryptocurrency transactions. Square reported $3.5 billion in bitcoin revenue in its March-ended quarter. The company has also bought bitcoin, 5% of total assets at the end of 2020.

On the charts, Gordon highlighted $215 a share as a band of support for the stock. Square closed Thursday afternoon at $223.96.

Disclosure: Vios is long Square.

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