After a big rally on Monday fueled by positive COVID-19 vaccine news, the stock market is having a fairly good day on Tuesday. As of 11:30 a.m. EST, the Dow Jones Industrial Average was up by 0.7%, while the S&P 500 and Nasdaq Composite were slightly in the red.
Fintech giant Square (NYSE:SQ) is one of the biggest underperformers. The stock is down by nearly 5% today, and that comes on the heels of an even larger decline yesterday. In all, Square has lost 12% of its value since the weekend.
The biggest driving force is likely a market rotation away from so-called "stay-at-home" stocks and into the more beaten-down industries that could be the biggest beneficiaries of a COVID-19 vaccine. We're seeing bank stocks, REITs, and experiential companies like casinos and cruise lines soar, and tech-focused companies that have thrived during the pandemic fall.
To be sure, there's certainly a physical retail element to Square's payment processing business that is likely to benefit from the economy reopening. But adoption of the Cash App and several of Square's online business-focused offerings have accelerated in the pandemic.
It's also worth noting that Square announced and priced a new $1 billion convertible debt offering to raise capital. Now, at a 0.25% interest rate this is a nice way to get cheap capital to help fuel growth. On the other hand, as convertible debt it could ultimately end up diluting investors (although with a conversion price of about $299, this would be a good problem for Square investors).
It's important to note that even after the recent decline, Square's stock price has nearly tripled over the past year. So, investors should take a step back and take today's move with a grain of salt.