Square, Tidal, and ARKF: A Lucrative Fintech Trio?

The ARK Fintech Innovation ETF (NYSEARCA: ARKF) is the exchange traded fund with the largest exposure to Square (NYSE: SQ).

That trait has long been a pivotal catalyst for the ARK fund and it’s one worth revisiting following Square’s recent purchase of a $297 million majority stake in Tidal, a music streaming service.

“Square may not be a music-streaming app just yet. But it’s inching into the music industry with plans to buy streaming service Tidal. And that is good enough for some analysts to get more bullish on the stock,” reports Daren Fonda for Barron’s.

ARKF member firms are companies that are powered by innovations, working to disintermediate or bypass the current financial markets and challenge traditional institutions by offering new solutions that are better, cheaper, faster, and more secure.

For Square and ARKF, there could be more than meets the eye with the Tidal deal. In fact, the music streaming service could fit well with Cash App – Square’s digital wallet.

A Compelling Combination

“We like Square‘s deal for Tidal,” Guggenheim’s Jeff Cantwell wrote in a note on Thursday, reiterating a Buy rating on the stock and bumping up his price target to $290 from $288. “Though it remains early days,” he added, “we believe adding Tidal can be significant for Square, given clear synergies between the two companies.”

Square moving into direct deposits is the latest sign of fintech companies, including plenty of ARKF components, moving into areas previously dominated by traditional banks. For example, Square is also playing a significant role in processing payroll protection program (PPP) loans. The company also recently procured a banking charter in Utah.

To be sure, those are positives, but Square’s Cash App is likely to provide epic growth for the burgeoning fintech company.

Fintech allows financial firms to leverage cutting edge technology to reduce costs, improve decision-making and risk controls, remove middlemen, and enhance customer experiences. A thematic approach includes investments that stand to benefit from structural change driven by demographic and technological changes.

“Cantwell expects Tidal to eventually add $110 million in incremental annual revenue to Square by expanding the payments app into the music/entertainment business,” concludes Barron’s.

ARKF All Time Performance

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.