It’s tough to say which investors will ultimately prevail in the recent retail trading frenzy, but one retail trading app that is poised to do well is Square (ticker: SQ).
Last week retail traders were angered when popular trading app Robinhood imposed restrictions on several popular stocks including GameStop (GME), AMC Entertainment (AMC), and BlackBerry (BB). While Robinhood wasn’t the only platform to curb trading in select names amid a surge of volume, it attracted the most scorn due to its marketing as the platform for the people.
What may be Robinhood’s loss, so far has turned into Square’s gain. Analysts at Mizuho Securities found that of the traders who abandoned Robinhood for other platforms, 40% went to Square’s Cash App. After Cash App, traders went to Stash, Fidelity, and TDAmeritrade.
Roughly a third of the Cash App converts were completely new to the platform but nearly 75% of them expressed interest in using Cash App for Bitcoin and the platform’s Cash Card, implying that the platform is becoming more successful in capturing users’ wallet share.
How long the trend toward Square’s Cash App remains to be seen, given that nearly 50% of Robinhood deserters said that they would consider moving back to the app. But if Square is successful in maintaining retail trader’s interest, it may not need to worry.
Ahead of the recent trading boom, Mizuho analysts rated Square a Buy with a $300 price target—roughly 40% above recent trading levels.
Outside of Square’s trading app, analysts are bullish on the company’s other products, particularly the point-of-sale products it offers to help small businesses.
“Square is best positioned to benefit from [small-medium business] dislocation, in our view,” wrote Dan Dolev, managing director at Mizuho.
Square shares slid 1% in trading Monday while the S&P 500 gained 0.7%.
Write to Carleton English at [email protected]
