Square Stock Vs Apple: Which Is Best?

Square Inc (NYSE:SQ) is a leader in financial technology with a payment network that rivals PayPal (PYPL) and traditional banks.

Founder and CEO Jack Dorsey (who also founded Twitter (TWTR)) grew the company into a venerable payment enterprise. Its mobile square readers fueled the entrepreneur and small business rush and its Cash App service is name checked in rap songs around the country.

But it didn’t get here without catching the attention of Apple Inc (NASDAQ:AAPL), whose Apple Pay mobile payment solution and iPad point of sale (POS) devices are finding their way into restaurants and retailers everywhere.

So which is better: Square stock vs Apple? We outline their moves in the payments space. It’s a two-sided marketplace that involves onboarding both businesses and consumers.

The world rushed to online shopping and contactless payment options since the stock market crash following the pandemic, and it poises both companies to continue profiting from this trend. Let’s see how they’re doing it.

Celebrities Backed Square Stock… And Won

Besides Dorsey, Square came with a slew of high-profile angel investors, including Marissa Mayer, Shawn Fanning, and even MC Hammer.

By the time of its November 2015 IPO on the New York Stock Exchange, they valued it at $2.9 billion. Since the market crash, when it dropped to a low of $32.33 per share, the company rebounded with a value approaching $80 billion and rising.

Its P/E ratio of 375x has some investors wondering if it may be overpriced, and it began a decline in the week following the November election.

Square’s deflated price had nothing to do with its earnings, which were more than double analysts’ expectations of $0.16 per share at $0.34 per share. This represents year-over-year growth of 66.2 percent.

The biggest contributing factor to its dip was the news of Pfizer’s (PFE) positive coronavirus vaccine results. This pushed investor interest away from virtual tools, like CDNs and contactless payments, toward industries like hospitality, travel, and retail that may get a boost from a reopening economy.

Even though it’s still being regularly used, investors are uncertain whether it can maintain its growth rate when the economy “goes back to normal,” whatever that is. Of course, that’s not going to be as much of a problem for its rival Apple (AAPL).

Apple Pay Revenues Are A Blip 

There’s no doubt Apple benefited from the global pandemic. Its Q4 fiscal year 2020 report showed $64.7 billion in revenue for the quarter, which equates to $0.73 per diluted share.

It rose back to its status as one of the world’s few $2 trillion companies (alongside Microsoft) and it continues expanding its markets into personal electronics, apps, content, automated cars, payments, and a smart home ecosystem.

However, while the company is huge, Apple Pay is a relatively negligible part of its profits. That’s not to say it’s nothing – Apple Pay is estimated to account for 5 percent of all global payment card transactions.

Part of its iPad sales are also to use as POS systems. By this point, you’ve likely been to a neighborhood restaurant or retailer who uses either an Apple or Square POS system.

Building out that infrastructure will be key to Apple’s continued profitability, although iPads sell for a premium over Square’s tablets, which are Android-compatible.

Apple’s iPads are compatible with most of the top third-party POS platforms, like ShopKeep, NetSuite, and Toast, which makes it a worthy opponent.

Should the company sign up enough major clients, it could muscle both Square and PayPal out of the fintech space. At a bare minimum, it can use its vast resources to stunt their growth, which brings us to the risks of investing in these stocks.

Square Stock Threatened By Big Competitors 

Besides the hurdle of a successful vaccine catalyzing the reopening of the economy, Square has an uphill battle ahead.

If you didn’t already notice the number of competitors named above, let’s not forget the legacy banking industry.

Financial giants like Visa (V) and MasterCard (MA) are already heavily invested in the digital space, and it’s their legacy networks being replaced. There’s also a push in the European Union to end its reliance on American financial networks. This spells trouble for the company’s growth potential.

And then there’s the coronavirus – while it’s unlikely that the push to virtual services will end, our reliance on them will slowly wane off.

That means Square could slowly deflate over the next two years as it works to pivot into other industries. This also gives a chance for its competitor Apple to take some of its market share.

Dangers Of Investing In Apple

Apple is more than a payments company. It’s one of the leading companies in the world with a sizeable portion of a lot of different markets.

Its size doesn’t make it invincible though – in fact, both Apple and Microsoft (along with Facebook and Google) are facing rising antitrust concerns as the pendulum of net neutrality swings back in the direction of these tech giants.

It’s already fighting Fortnite developer Epic Games in an antitrust suit that could cost the company a lot of money, especially if it loses.

Apple’s biggest strength is its closed ecosystem that forces everything downloaded through its App store, which gives it a cut for in-app transactions. Should Epic succeed, it would change the mobile app landscape, and even if Apple wins, it’ll face the government again soon enough.

That’s not even considering its Chinese exposure during a heated trade war.

Apple Vs Square Stock: The Bottom Line

Square is a hot company in fintech, growing to an entire suite of digital payment services that filled in gaps in the traditional financial industry. For everything it builds, though, it’s matched by Apple’s own payment ecosystem.

The tech giant is just one of many companies competing in the space that investors cooled on when the coronavirus vaccine signaled a return to normalcy.

How long that economic recovery takes is up in the air though. And no matter what happens, digital payments are here to stay. A new breed of innovative small businesses will rise from the ashes of the coronavirus pandemic, and both Square and Apple are poised to benefit…if they can fight off competition and regulation.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.