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Why Square Stock Shot Higher by More Than 4% Today

By Eric Volkman – Oct 5, 2021 at 5:19PM

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An influential young-consumer survey shines a favorable light on the company's Cash App.

What happened

Popular fintech stock Square (SQ -1.43%) was a hit with investors Tuesday, rising to close 4.3% higher. This followed a good showing in an influential study of Gen Z consumers.

So what

That study is "Taking Stock With Teens," a concentrated, semi-annual piece of research into youth trends conducted by financial services company Piper Sandler (PIPR 3.23%). In "Taking Stock," Piper Sandler dives into the relationship of young consumers with various consumer goods, tech, and financial-services products and companies.

Young couple seated on steps, looking at a smart watch.

Image source: Getty Images.

In terms of the latter, Piper Sandler found that Square's Cash App is the No. 2 mobile payment app in terms of popularity in the demographic, behind PayPal's (PYPL -4.93%) widely adopted Venmo. At first glance, that isn't particularly encouraging news. However, Piper Sandler's research indicates that Square's offering is gaining ground.

"The penetration rate of Square's Cash App increased to 34% from 28% with payments apps for teens," it wrote in the report. And although Cash App is still behind Venmo, it has replaced another PayPal offering, Mobile Cash, as the second place competitor.

Better yet, in the rapidly emerging buy now/pay later segment, Piper Sandler found that Afterpay is No. 2 with a relatively high penetration rate of 32%. Afterpay should soon land in Square's portfolio, once the blockbuster $29 billion acquisition deal agreed by the two companies closes (anticipated to occur early next year).

Now what

According to the most recent official data we have on hand, Cash App is hardly a distant second to Venmo. Last month, Square revealed that it boasts over 70 million active users, while PayPal pegged Venmo's active user base at more than 75 million. So not only is Square a major player in person-to-person (P2P) payments segments, it's prominence is growing. It's entirely conceivable Square could take the lead before long.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends PayPal Holdings and Square. The Motley Fool recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.

Stocks Mentioned

Block Stock Quote
Block
SQ
$68.18 (-1.43%) $0.99
Piper Sandler Companies Stock Quote
Piper Sandler Companies
PIPR
$148.17 (3.23%) $4.64
PayPal Stock Quote
PayPal
PYPL
$74.66 (-4.93%) $-3.87

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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