I was thinking of cutting SQ but the following analyst meeting made me pause:
It is really worth a listen. Some things I gleaned:
- SQ has only 2% of the total GPV of sellers with annual GPV >500k. By my calcs they have 10% of the total GPV of sellers with annual GPV <125K. SQ’s GPV of the larger sellers is growing at 50% yoy while the smaller sellers GPV is growing at 20%. The in-between seller GPV (by my calcs) is growing around 40%. So, they are making good headway in the larger sellers and this should ensure that their GPV continues to grow in the 25-30% for the next few years. Remember overall payment market itself is growing at 10% yoy.
- Got a much better appreciation of their eco system and how cash app is connected to the seller POS and so on.
- Their GPV is only 1% of the total household spend.
Putting together the TAM of the total GPV, growth of the larger sellers, and subscription rev growth I cannot see any sharp slow down in rev growth. The concern seems to be that Square goes after bigger merchants they will not be able to grow GPV as fast due to competition. But the GPV growth in the larger sellers shows that concern to be unfounded. The other concern is that SQ is already too big. But big/small depends on a company’s TAM. I think SQ’s TAM is being under appreciated at the moment. It seems the market is saying SQ cannot grab a large portion of the GPV of the larger sellers. So hanging him at least till the next CC.