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Why Square Stock Skyrocketed 248% in 2020

By Joe Tenebruso – Jan 3, 2021 at 8:21AM

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The fintech star is making its shareholders rich.

What happened

2020 was a great year for Square's (SQ 0.23%) investors. The digital payments and financial services leader delivered gains of nearly 250% last year, according to data from S&P Global Market Intelligence. Better still, Square's shareholders could be in store for even more gains in the year ahead.

Here's why.

So what

COVID-19 is accelerating the shift away from cash and toward digital forms of payment. Square is helping to enable this trend. The fintech company's payment-processing services allow merchants to quickly and easily accept credit and debit card transactions, while its popular Cash App lets people digitally send and receive money.

$100 bills overlaid with digital ones and zeros.

Square and its shareholders are benefiting as money becomes increasingly digitized. Image source: Getty Images.

All told, Square's gross profit soared 59% year over year to $794 million in the third quarter. Meanwhile, its adjusted earnings before interest taxes, depreciation, and amortization (EBITDA) rose 38%, to $181 million. 

Now what 

Square is helping merchants adapt to an increasingly online world. New offerings such as website development tools and other e-commerce solutions are giving its customers what they need to survive and thrive during the pandemic. And as they grow their businesses in the coming years, Square's profits should grow right alongside them.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Square. The Motley Fool has a disclosure policy.

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