Is inflation here to stay? When is the Fed going to start raising interest rates? Is the world ever going to move past the pandemic? If you're an investor, I'm certain these questions have been on your mind. And they probably have you worried about a potential market crash in the near term.
You can take advantage of the stock market's volatility, however, to bolster your own portfolio by buying shares of great companies that are on sale. Here's why Square (SQ -1.94%) is one such opportunity right now.
A brief history lesson
From late February through late March of 2020, when strict lockdown measures were first put in place here in the U.S., the S&P 500 dropped 31% and Square fell 54%. Major economic and health worries ripped through markets, causing even the best of companies to shed massive amounts of value along with the overall market.
Since then, Square's stock price has skyrocketed more than 500%. Investors who didn't panic and held onto -- or even added to -- their holdings were handsomely rewarded. In these situations, the key is to focus on the company's fundamentals and not on what the rest of the market is doing. Square's revenue grew 44% in the first quarter of 2020 and 64% in the second, so the business was actually booming when the market sold off.
But keeping your cool and staying calm is very difficult to do in practice because it requires you to tune out others' actions and opinions. The financial benefit of staying the course, though, is strikingly clear.
It doesn't even have to be an extreme market crash like the one we experienced more than 18 months ago. Just over the past month, Square is down 11%, presenting investors with another potentially lucrative opportunity to acquire shares of this flourishing fintech.
User-friendly financial services
Square offers a number of financial tools for both merchants and consumers. Sellers have a full suite of 30 different software, hardware, and financial-services features to choose from to help run their businesses. And with Cash App, Square lets customers send and spend money, set up direct deposit, and invest in stocks and Bitcoin. Co-founder and CEO Jack Dorsey identified a serious market need that the big banks weren't addressing, and that's why his company now carries a market capitalization of $110 billion.
The company's seller ecosystem processed $38.8 billion in gross payment volume (GPV) in the most recent quarter and increased gross profit 85% year over year. The Cash App ecosystem is also performing well, with 40 million monthly active users and Q2 gross profit of $546 million.
Square's ability to deepen the connection between these two customer groups only strengthens the company's competitive position and increases the value it provides. By purchasing buy now, pay later leader Afterpay, Square can integrate the Australian fintech's nearly 100,000 merchants and 16.2 million consumers into its already huge user base. Additionally, the recently launched Cash App Pay allows customers to check out with their Cash App balances in-store or online directly with seller merchants.
Wall Street analysts estimate Square's earnings will soar at a compound annual growth rate of 93% over the next three years. Keep calm, take advantage of the market's near-term pessimism on the stock, and consider buying shares of Square. The opportunity could end up making you rich.