Why Does Cathie Wood Like Square?

Why Does Cathie Wood Like Square? Some leaders in the financial services industry would be forgiven for thinking that Cathie Wood can see the future. However, there is nothing mystical about her gift. She puts in the hours to research new technology and cutting-edge businesses so she can predict the large-scale impact of disruptive innovation. 

Wood’s research gives her deep insight into which companies and industries will profit from technological advances. She uses that insight to make investment decisions for her ARK family of funds – a collection that includes six actively managed ETFs: 

• Innovation ETF (ARKK) 
• Autonomous Technology & Robotics ETF (ARKQ)
• Next Generation Internet ETF (ARKW)
• Genomic Revolution ETF (ARKG)
• FinTech Innovation ETF (ARKF) 
• Space Exploration & Innovation ETF (ARKX)

So far, ARK investors are pleased with their returns. Wood has made one smart move after another. She is a big believer in Bitcoin and Tesla, and lately, she has been talking up Square (SQ). In financial circles, this attracted a lot of attention. Everyone wants to know – why does Cathie Wood like Square? 

What Is Cathie Wood’s Investing Philosophy?

Before she launched ARK Invest in 2014, Cathie Wood spent decades in the financial services industry. Over time, she noticed patterns – particularly as they relate to disruptive innovation. 

As the technology of today is retired in favor of options that are faster, more efficient, and more effective at solving big problems, some companies and industries fade away. The companies that can’t keep up are replaced by startups that enter the market ready to capitalize on enhanced technology or businesses that flex and adapt to a rapidly changing world. 

Cathie Wood’s investing philosophy is simple: identify the companies and industries poised to win big based on technological developments. 

For the moment, Wood’s research has pointed her to five areas of opportunity:

• artificial intelligence,
• robotics,
• DNA sequencing,
• energy storage, and
• blockchain technology.

Every asset in her six funds can be traced up to those innovations – some more directly than others. So how does Square (SQ) fit in? Specifically, why did Cathie Wood buy Square? 

Why Did Cathie Wood Buy Square?

Square might not have been the very first into the digital payments space, but it rapidly established a leading position in the industry. It’s growing fast, and Cathie Wood expects that growth to continue. In fact, Square stock makes an appearance in several of her ETFs. 

ARK Invests’ FinTech Innovation ETF (ARKF) is particularly pro-Square. As of April 28, 2021, ARKF owns 1,704,391 shares valued at roughly $433 million. That represents nearly 10 percent of the fund’s total holdings. 

Cathie Wood decided to buy Square because it is on the cutting-edge of disruptive and innovative payment solutions.

In addition to transforming traditional merchant services and opening digital payments up to merchants of all sizes, Square has embraced cryptocurrency – and Wood is convinced that cryptocurrency is on the cusp of widespread adoption. 

Cathie Wood SQ Price Target

Square isn’t resting on its current success. It is constantly exploring new opportunities to expand its services and its consumer reach. That’s why it holds a place of honor in Cathie Wood’s funds. 

Cathie Wood’s SQ price target projects significantly more growth from current levels. She expects SQ share price to hit $500 or more by 2025. 

Is Cathie Wood Wrong About Square?

Square displays all the signs of substantial growth as the decade progresses, but that is no guarantee that investors will realize returns. While Cathie Wood has been firm in her support of Square, even the most experienced fund managers can make a misstep. 

So, is Cathie Wood wrong about Square? The most reputable analysts say no. They agree that Square is well-positioned for exceptional long-term growth.

The biggest risk is a bit of short-term volatility. That’s normal – particularly in the world of digital payment solutions. 

How High Could Square Go?

Cathie Wood’s projected $500+ Square stock price is intended to cover the next four years of growth. For those wondering how high could Square go in the coming 12 months, the projection is a bit less dramatic. 

Square stock gained 212 percent over the last 12 months, primarily driven by changes in consumer behavior due to the pandemic. That is unlikely to be such a significant factor in the next 12 months. Still, a majority of analysts say Square stock is a buy with an average target price of $272 per share. 

Some, like Cathie Wood, are more optimistic. On the high end, one analyst says $380 per share is a reasonable expectation. Of course, there are naysayers who strongly believe Square is overvalued. They expect a correction, with share prices dropping as low as $155 by April 2022. 

Conclusion: Why Does Cathie Wood Like Square? 

The bottom line is that Square has all the elements an investor wants in a disruptive, innovative company. Square’s management team are prepared to make bold moves to boost business, and they focus resources on enhancing products and services to hold their place as the first to move on technological advancements. 

Square did particularly well in 2020, primarily because its CashApp peer-to-peer funds transfer service took off. It is now moving into tax preparation, music streaming, and cryptocurrency – all opportunities to expand its ecosystem and encourage continued growth. 

If successful, Cathie Wood’s Square price target could be on the low side. Simply matching 2020’s growth over the next 12 months could take Square shares past the $500 mark. 

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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.