Why Square Inc's Shares Popped 11% in July

By Travis HoiumMarketsFool.com

Image source: Square Inc.

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What: Shares of payment processor Square Inc (NYSE: SQ) jumped 11.3% in July, according to data provided by S&P Global Market Intelligence, as the company began a global expansion plan.

So what: Square incorporated Square Europe in July, and appears ready to expand in the region. This could help Square leverage its research and other operating expenses to an even broader audience of customers. If Square is going to become a profitable entity, it will have to increase revenue growth without growing operating expenses at the same rate. So far, that's been tough to do for Square.

Now what: Since Square is losing money, it's hard to say when the company's shares will be a great value for investors. And the growth of operating expenses in recent quarters has been a concern for investors. But if management can leverage those expense and investments in back office tools to gain share in Europe along with the key market of the U.S., it'll be a positive for the company.

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Before getting too bullish, I'd like to see investments and expansion plans starting to take hold on revenue and lower losses. And the earnings report Wednesday afternoon will tell us how the company is progressing. In a competitive payments business, Square could face an uphill battle to become a preferred payment processor, despite its apparent popularity with retailers.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.