Should I buy Square stock for my portfolio?
One area of technology Im bullish on is FinTech (financial technology). In the years ahead, I expect these businesses to have a very disruptive effect on the financial industry. I own a number of stocks that operate in this space, including PayPal, Mastercard, and Visa. One FinTech stock I dont own yet however, is Cathie Wood favourite Square (NYSE: SQ). Lets take a look at the investment case. 5G is here  and shares of this sleeping giant could be a great way for you to potentially profit! Square has developed innovative payment solutions for both businesses and individuals. For businesses, it offers a range of different solutions designed to improve efficiency. These include contactless card readers that help small retailers complete transactions, and point-of-sale solutions that help businesses manage sales, payments, records, and inventory. For individuals, it offers the Cash App. This is essentially a digital wallet that allows people to send, spend, and save money in one app. This boasted more than 36m monthly active users at the end of 2020. Square is also active in the cryptocurrency space. Over the last year, the company has spent over $200m on Bitcoin. Users of the Cash App in the US can also buy and sell crypto through the app. What I like about Square stock  There are a number of things to like about Square, in my view. For starters, the business has carved out a real niche in the small business payments space. This is an area thats traditionally been neglected by the banks. Across the world, millions of businesses now use Squares payment solutions and the general consensus is that the solutions are very good. On Trustpilot UK, for example, Square has a great rating (4.2 out of five) with 84% of businesses saying Square offers an excellent service. Its worth noting that JP Morgan CEO Jamie Dimon said he wishes his bank had done what Square has done in the small business space. He also said his bank should be very scared of FinTech players such Square. Secondly, Squares growth is very impressive. Between 2017 and 2020, Square grew its revenue from $3.3bn to $9.5bn. That represents annualised growth of 42%. By contrast, rival PayPal achieved annualised revenue growth of 18% over the time period. Meanwhile, in the companys latest Q1 results, it reported 44% revenue growth, excluding Bitcoin revenue. Including Bitcoin, revenue growth was 266%. Risks  One concern for me however is that, unlike PayPal, Square doesnt have a strong profitability track record. PayPals been profitable for years and has delivered consistent growth in net income in recent years. By contrast, Square hit positive net income for the first time in 2019. And last year, net income was down on the 2019 figure. Another concern for me is the valuation. Currently, Square trades on a forward-looking P/E ratio of about 160. Thats a high valuation. By contrast, PayPal trades on an earnings multiple of about 64. At its current share price, Square has a market-cap of over $100bn. Overall, I think Squares a very impressive company. However, I dont see the stock as a strong buy right now, simply because the valuations so high. So, Im going to keep Square on my watchlist for now. If we see another pullback in tech stocks in the near future, I may take another look at the stock.