Pro: Comparing Square to JPMorgan in the 1870s is ‘a bit of a stretch’

By: Ruchi Gupta
Ruchi Gupta
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on Jul 16, 2021
  • Mizuho analysts compared buying Square stock today with buying JPMorgan in the late 1800s.
  • One pro disagrees and says the comparrison is 'a bit of a stretch'
  • Investors may want to consider legacy payment companies like Visa.

Buying Square Inc (NYSE: SQ) stock now is akin to buying shares of Wall Street giant JPMorgan Chase & Co. (NYSE: JPM) stock back in the 1870s, according to analysts at Mizuho. The bold call is certainly drawing some controversy with bulls cheering the rating while others aren’t as convinced.

Among those that aren’t as bullish is Michael Binger, President of Gradient Investment who thinks investors are better off with other legacy payment stocks.

Square’s performance compared to JP Morgan an exaggeration

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Binger said on a recent CNBC “Trading Nation” segment he is bullish on the financial technology space and it will prove to be a “secular growth industry for a long time.” Square’s Cash App feature in particular could see continued momentum for “quite some time.” But this doesn’t mean it is accurate to equate Square today to JPMorgan centuries ago. He said

I think that’s a bit of a stretch, but it’s directionally correct. I think the market is underestimating growth potential at Square — rapid growth there coming from Cash App. They’re a strong franchise.”

However, Square does have a lot working in its favor outside of Cash App, including international expansion while its exposure to cryptocurrency represents the “next leg” of growth, he said.

But legacy payment stocks like Visa Inc (NYSE: V) and Mastercard Inc (NYSE: MA) should outperform as cross-border revenue growth amid a resurgence in traveling. Overall, the fintech space is a “great industry to be invested in” and Binger’s firm is a shareholder in all three names mentioned.

The digital payments space becoming increasingly competitive

In the same interview, JC O’Hara, chief market technician at MKM Partners, agrees that the digital payments space is becoming increasingly competitive. When asked to pick one fintech stock to invest in, he said his “favorite name” is Visa. Visa stock is showing “leadership within the space” and the stock has the potential for “meaningful upside” from here. He added:

Visa consolidated during most of 2016, early 2017, [then] broke to new highs. The structure is very similar to today, and we can see just how uninterrupted that bull run over 2017 was. So if we see any sort of run similar to 2017, we are in for some meaningful upside for Visa here.

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