By Alexander Osipovich 

Square Inc.'s stock has jumped 15% over the past week to close at a record on Monday, as the coronavirus pandemic has prompted consumers sheltering at home to make greater use of the payments company's tools.

Class A shares of San Francisco-based Square closed at $118.97, rising 4.9% for the day. Their price has more than tripled from the low on March 20.

Some Wall Street analysts recently have grown more bullish on Square, buying into the arguments of Jack Dorsey, its chief executive and chairman, that the company will disrupt the traditional banking and payments businesses.

As the stock market has rebounded in recent months, investors have rewarded companies -- from technology giants to grocers and makers of recreational vehicles -- that can benefit from pandemic-driven shifts in consumer behavior.

It wasn't immediately clear that Square would be one of them. Its stock dropped more than 55% from February to March, as lockdowns led fewer people to visit small merchants that use Square's popular credit-card reader for smartphones.

But Square has benefited from burgeoning activity in other parts of its business, particularly its rapidly growing Cash App, a peer-to-peer payments tool that lets users send and spend funds and invest in stocks and bitcoin. The app's direct-deposit volumes roughly tripled from March to April as many customers used the app to receive government stimulus payments, Square says.

Other players in the payments business have benefited from the same trends. During the past week, shares of PayPal Holdings Inc., maker of the rival Venmo app, have gained 4.7%. The S&P 500 has risen 4.1% over the same period.

Last week, analysts at Rosenblatt Securities upgraded Square to "buy" from "neutral," predicting that revenue from Cash App, excluding bitcoin, would more than triple over the next five years.

"As Square develops, rolls out, and monetizes many services across the payments and financials ecosystems, it will lay the groundwork to make the company a need-to-own name for years to come," Rosenblatt's analysts wrote.

Square's skeptics have said it is overvalued -- and that was even before the recent run-up in its stock price. Based on its closing price from Thursday, Square has an eye-popping trailing price/earnings ratio of 186, compared with 112 for PayPal and 22.5 for stocks in the S&P 500.

Mr. Dorsey also has been criticized by some investors for splitting his time between two roles, as CEO of both Square and social-media giant Twitter Inc.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com

 

(END) Dow Jones Newswires

July 06, 2020 17:40 ET (21:40 GMT)

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