I have been a SQ bull but finally sold it today. My main issue was its rapidly slowing GPV. Payments is SQ’s core business and it is already growing at the same 25% yoy rate as PYPL whose GPV is 6.5x larger!
Here is SQ’s quarterly GPV growth (latest at the end) - 45%, 42%, 39%, 34%, 33%, 32%, 31%, 31%, 31%, 30%, 29%, 28%, 27%, 25%
Out of the overall GPV the larger companies (>125K) are growing faster but they are slowing down quite fast as well - 44%, 45%, 44%, 44%, 44%, 42%, 41%, 39%, 37%, 34%.
The trend clearly is downwards.
I liked the Caviar sale as it can help refocus rise the slowing GPV. But clearly the issue is a company not firing on all cylinders. You may say what about the subscription growth rate.
Subscription growth rate by quarter - 106%, 99%, 84%, 96%, 98%, 127%, 155%, 145%, 125%, 87%
Clearly the weebly, zesty acquisitions in late Q2 2018 (5/31/18) bumped it up but organic growth is still 70%+
But sub rev is also dependent on gpv. I would think it is the same sellers who provide the gpv that contribute most of the sub rev.
Sure gpv, and sub rev can re accelerate with doordash, evenbrite in the 2nd half. But with no Caviar, 2020 rev may take a hit. I estimated that Caviar contributed about 10% of rev. So, excluding that, 2020 rev may drop to <30%. This is likely to be another near term negative on the stock. A minor plus is SQ is at the same P/S as it was back in 12/17 - so perhaps downside is limited. But I decided to sell this lower confidence position and add to my ZS.
Hoping this is useful to some of you. Please investigate thoroughly before deciding. I have certainly benefited by many of you regularly articulating your thought process here.