3 Drivers of Square's Growth

Investment Analysis Clubs Saul’s Investing Discussions
1

I’ve recently been blessed with the opportunity to try out my writing skills for the public side of Motley Fool. My first article was on PayPal and appeared a couple of days ago: http://discussion.fool.com/1081/an-obvious-winner-of-the-e-comme…

My second article was published today and it covers three fast-growing services Square is offering its customers. While the payment solution space offers low margins, if Square can use that as their foot in the door, to sell its customers much more lucrative services, it could do very well.

Since its IPO in November 2015, Square has given its shareholders a wild ride, swinging from lows just a shade higher than $8 to highs near $16. While the company has yet to turn a profit on a GAAP-basis, many other metrics show consistent growth across the company’s platforms. In Square’s 2016 third quarter, the company reported $178 million in adjusted revenue, a 51% increase year over year. The company’s gross payment volume (GPV) was $13.2 billion, a 39% increase from the year ago period.

Square offers basic point of sale (POS), online, and mobile payments solutions to its customers. It also provides more sophisticated services like customizable platforms for merchants; business loans, instant pay features, and even restaurant delivery services. Most of these extra features are listed under Square’s software and data product segment, the company’s fastest growing revenue category.

The software and data product segment is loaded with extra features that Square’s merchants seem to be utilizing, judging by the results. This segment’s revenue grew an incredible 140% year over year in its most recently reported quarter.

Whether Square can continue its current success probably depends on three of the company’s fastest growing services found within this category: Instant Deposit, Square Capital, and Caviar.

Please read the whole thing at http://www.fool.com/investing/2016/12/22/3-business-segments…

As I research the company more, I grow more intrigued. No position yet, but its on my watchlist.

Matt
MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

14 Likes
2

Excellent article!

Tom

2 Likes
3

Awesome, Matt!

Your first article must have been for a paid service only. If you can (and want to), please post the text here for those of us without access.

Bear

1 Like
4

My bad, Bear. I posted the link to the paid service board post I did on on writing the article. Doh!

Here is the actual link to the PayPal article: http://www.fool.com/investing/general/2016/12/14/an-obvious-…

And thanks Bear and Tom!

Matt
Long PYPL
MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

5

Matt, I remember seeing that PYPL had made some kind of serious concession to MA and V. Does that affect your outlook?

1 Like
6

Matt,

I’d be curious what you think about the Visa thing too.

Also you said:

Trying to pick investment winners and losers in this brave new digital retail world can be tricky. But whether consumers choose to buy their Christmas gifts on Jet.com or Macy’s beefed up website, PayPal makes money on every single transaction facilitated through their platform.

I was wondering how Paypal made money on all these transactions (thinking, can’t people just pay with credit card?) but thankfully Google search quickly enlightened me, at least regarding Jet.com:

http://www.investors.com/news/technology/how-paypal-hooked-e…

This notes that Amazon does its own payment tech, and Square has showed up to compete for website payments too. Won’t Paypal have to fight for its place here as other players come in like Square has and offer similar services?

For me, most of my e-commerce dollars go to Amazon, although I do use Paypal where possible on sites I’m less familiar with.

Great article, and I’m glad you’re using your writing/analysis talents like this!

Bear

1 Like
7

Strelna/Bear,

My very next PayPal article will be on PayPal and their Mastercard/Visa partnerships. If you could wait a few days I would love to pick up this conversation when I’m finished with the article.

Bear,

Right now the writing is just for a ten article trial period. Hopefully I will be given the opportunity to keep writing after that!

I was wondering how Paypal made money on all these transactions … Won’t Paypal have to fight for its place here as other players come in like Square has and offer similar services?

So, yes, PayPal’s Braintree platform will most definitely have to compete with Square and other payment solutions companies. The article was referring however to all transactions made through PayPal:

But whether consumers choose to buy their Christmas gifts on Jet.com or Macy’s beefed up website, PayPal makes money on every single transaction facilitated through their platform.

What I hopefully conveyed in the article is that e-commerce is a worthy macro trend to look to when considering investing. Its growing at a double digit clip. But PayPal is not only growing along with it, the company is increasing market share too. So when trying to pick a winning e-commerce investment, instead of trying to pick one of a multitude of retailers beefing up its online presence, the better bet is simply PayPal.

I hope that clears it up :slight_smile:

Matt
Long PYPL
MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

3 Likes
8

My very next PayPal article will be on PayPal and their Mastercard/Visa partnerships. If you could wait a few days I would love to pick up this conversation when I’m finished with the article.

Absolutely! Something to look forward to.

Merry Christmas to all.

Bear

1 Like
9

Hi Matt

I recently replied to a similar post to yours over here:

http://discussion.fool.com/1228/hi-danny-over-the-last-couple-of…

Which invites some exploration of the recent phenomenon of solid board contributors shilling for readers on fool.com.

It is a premium board, but I believe your CMF status will enable you to access it.

Cheers

Cham

1 Like
10

Hey Cham,

I don’t know. Was this “shilling” for readers? Nobody is being paid by the click for these articles. Of course, I was eager to share with my “friends” the news of my opportunity. Most importantly to this board, Square was a company that was recently discussed by a few prominent members as an investment.

I honestly thought of it as sharing information about a company that only a couple weeks or so ago I promised to research.

I’m a ticker guide of several companies and what I consider one of my most important duties is to bring news and analysis to the board of the company. As such, I share articles from the public side of Fool.com all the time. It would be odd to not include my own articles when they are relevant, would it not?

I’m sorry you feel this is shilling. But I truly think it is just an example of those of us who were recently given this opportunity to write a few articles excited and eager to share the news.

Matt
MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

32 Likes
11

Hey Matt,
Do not lose your enthusiasm it is contagious and helpful to all. Thanks for all your hard work.

Cham, I was unable to read your post so I can not comment on it but reading your previous posts I know you are only trying to be helpful and not discourage anyone from growing their investing abilities.

Merry Christmas and a happy new year to all.

Andy

3 Likes
12

“Shilling” good god man! We all shill. Without shilling we’d have no desire to share our “wisdom” and worse those with the most to share would simply not share at all.

Chill. Word. My street cred you know. Please keep on shilling.

Tinker

10 Likes
13

My street cred you know.

That’s just the way it is, dog . . . .

https://www.youtube.com/watch?v=Ay9BWM8lwOA

OffTopicTupac

3 Likes