What happened

Shares of Square (SQ 0.37%) were up 23.7% in July, according to data provided by S&P Global Market Intelligence. Not only that, the stock hit an all-time high of $136.14 per share during the month.

For Square, there was nothing too noteworthy during July to explain the upward move. Rather, it appears the stock still has momentum from a first-quarter earnings report that exceeded investor expectations -- shares have doubled since then. Investors are hoping for more of the same when the company reports second-quarter earnings on Aug. 5. 

SQ Chart

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So what

Square management often talks of building two separate ecosystems of products and services: one for its seller platform, and the other for its Cash App. Square stock fell early in the year, as the COVID-19 pandemic threatened to wreak havoc on the seller side of Square's business, since many of its customers are small and medium-sized businesses. 

Square's seller business is indeed getting hit. In the Q1 report, the company noted that gross payment volume (GPV) was down 39% year over year in April. However, some seller services are seeing an uptick in demand. For example, Square's software can turn a brick-and-mortar business into an e-commerce operation in less than a day with its Square Online Store product. Businesses are turning to this at an accelerated rate. Weekly GPV on the Square Online Store more than quintupled from February to the end of April.

Where Square's seller business tripped, its Cash App business sprinted. New active, transacting customers joined at an unprecedented rate, leading to a quarterly gross-profit increase of 115% for Cash App. The strength of this side of the business more than made up for weakness on the seller side of Square, with total revenue up 44% year over year in Q1. 

A Square online store displayed on a smartphone.

Image source: Square.

Now what

So what does this have to do with July? Many of the factors that drove Square's adoption in April still hold true in July. The coronavirus is still present. Therefore, consumers are being nudged to transact more digitally than in times past, and Square is enabling the shift. Investors are betting on continued growth for the company.

Square hasn't given guidance for Q2, so investors will simply have to wait for results. But given the trends in the company's favor (e-commerce, contactless payments), I expect it to report substantial growth yet again.