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Why Shares of Square Jumped 24.5% in May

By Travis Hoium – Jun 8, 2020 at 3:38PM

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The economy is open for business, and so is Square.

What happened 

Shares of payment processor Square (SQ -3.79%) jumped 24.5% in May, according to data provided by S&P Global Market Intelligence, as investors bet on an economic recovery. In the first week of trading in June, shares were up another 10.9%. 

So what 

The biggest news coming from Square was its first-quarter earnings report, released early in May. The company reported a 44% increase in total revenue to $1.38 billion and adjusted EBITDA of $9 million, down 85% from a year ago. But the company's growth was impressive given that businesses were starting to shut down toward the end of the quarter and Square offered discounts for some services. 

Square reader on a bakery counter.

A Square system on a store counter. Image source: Square.

Investors were also betting on a quick economic recovery, pushing the entire market sharply higher in May. And as a tech favorite, it's not surprising Square's shares were among the best performers on the market. 

Now what 

Square is in an interesting position, benefiting from some of the moves to mobile payments and takeout orders and suffering from business shutdowns due to COVID-19. So the company should benefit from the reopening of the economy across the U.S. that's happening today. At the end of the day, this is still a great growth stock; it just may have some lumpy results as businesses adapt to a new way of operating in 2020. 

Travis Hoium owns shares of Square. The Motley Fool owns shares of and recommends Square and recommends the following options: short September 2020 $70 puts on Square. The Motley Fool has a disclosure policy.

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