Biggest Takeaway from Square's 3rd Quarter

Square started as an effort to empower small businesses to accept card payments. Think farmer stands, food trucks, etc. Square made this easy by making the hardware necessary to do this at the point-of-sale (POS) a simple attachment to an iPhone. Genius. The company has grown tremendously since this humble start but, to my eyes, have remained mostly focused on the traditional, brick-and-mortar retailer. That is beginning to change and Square is now offering omnichannel payment solutions - online, POS, mobile, etc. - that seem to be gaining major traction. Here’s my take:

Square Inc.‘s (NYSE:SQ) third-quarter earnings report earlier this month came on the heels of a pretty busy quarter. In the previous three months alone, Square made high-profile partnerships with both Eventbrite and SAP SE (NYSE:SAP) that essentially embedded Square’s payment processing services into the two companies’ business platforms, applied for a bank charter in Utah, and released Square Register, the company’s first high-end checkout terminal.

With this barrage of news as the backdrop, Square once again delivered an excellent quarter. Adjusted revenues increased to $257 million, a 45% increase year over year, and adjusted EBITDA increased to $34 million, an amazing 195% year over year increase. These powerful results were driven by growth in the company’s gross payment volume, the total dollar amount processed by Square, which grew to $17.4 billion, a 31% increase over 2016’s third quarter. The company’s take rate, its transaction-based revenue as a percentage of gross payment volume, remained steady at 2.93%.

With all the news and great numbers, I wonder if Square investors had a chance to digest what I thought was the most bullish takeaway from the quarter: how Square’s payment processing services are gaining real traction with omnichannel sellers.

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I want to raise my Square position but it seams pricey. I last added at $37. What is the saying, good companies always seam expensive?


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I entered into a 3.5% position in early August ($25.50), then less than a week later boosted it up to 8% ($25.55). It’s now up 60% and grown to 11.4% of my portfolio in those three months.

Short of becoming one of the folks here that put all their eggs in two baskets, I’m not sure how much more I’d be OK with it growing by my adding to it.