SQ stock traders ignore Rite-Aid collaboration, but shouldn’t
Source: Sergey Yelagin / Shutterstock
Afterpay, a subsidiary of the financial technology (fintech) giant To block (NYSE:SQ), is engaged in a potentially revolutionary collaboration with Ritual Aid (NYSE:GDR). However, the trading community does not seem to appreciate the importance of this event. So now is the perfect time to take a long position in SQ shares.
To different people, Block is known for different things. Some people consider Block to be the company formerly known as Square and the company that introduced the Cash app to the fintech market. Others might view Block as a company with significant interests in the cryptocurrency and blockchain spaces.
These are all valid points of view. However, let’s not forget that Block also owns Afterpay, the “buy now, pay later” (BNPL) company. As Afterpay works closely with a retail pharmacy giant, all stakeholders stand to benefit in the long run.
What’s going on with SQ Stock?
This may be because cryptocurrency prices crashed not so long ago. Or maybe it’s due to the fall in tech-related stocks in the first half of 2022. For some reason, SQ’s stock has fallen from nearly $300 almost a year ago to around 60 $ recently.
That’s a pretty big discount. Should Block’s shares be trading at such a low price even though the company is posting budget growth? Just because Wall Street isn’t favoring crypto and tech stocks right now doesn’t mean investors should avoid Block.
Consider that Block generated gross profit of $1.29 billion, up 34% year over year, in the first quarter of 2022. Drilling down into specific business segments, gross profit App Cash of $624 million was up 26%, while Square’s gross profit of $661 million was a 41% increase.
However, perhaps the most significant event of the first quarter of the year for Block was the acquisition of Afterpay. This acquisition was finalized on January 31. As a result, Block claimed its position in the potentially lucrative BNPL space.
A new generation of consumers
One particular development should convince skeptics that Afterpay could be a major revenue generator for Block. Apparently, Rite Aid online shoppers will now have “a new way to pay for everyday items in four installments at no extra cost when you pay on time.”
Not only does Rite Aid allow its customers to use Afterpay for purchases made online on its website, but the pharmacy giant also plans to “roll out its flexible payment option to stores nationwide in the coming months.” . It really is a perfect marriage, as today’s online shoppers expect flexible payment options at the point of sale.
Indeed, the press release specifically cites the potential connection to younger buyers, saying, “With nearly 70% […] From Afterpay’s highly engaged network of digitally native Gen Z and Millennial customers, Rite Aid can expect to see a new generation of consumers shop online using BNPL.
What you can do now
Doesn’t the market appreciate the growth potential of the BNPL space, or Afterpay’s role within it? If so, there is a tremendous buying opportunity today with SQ shares.
So enterprising investors can rush in and grab a few stocks while they’re still discounted. The message to critics is crystal clear: Now is the time to overcome your emotional block and take a chance on Block.
As of the date of publication, David Moadel had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.