I know that most of you have gotten out of Square before the debacle. I’d like to think I did well by selling some of my shares after earnings, I reinvested the money in companies that fell a lot anyway, just not quite as much. But it may be time to take a look at putting more money into the company’s stock now.
Here are some historical data:
ARevTTM Mar Jun Sep Dec WASh Mar Jun Sep Dec
2014 276 2014 135 141 144 148
2015 313 357 400 452 2015 145 149 152 235
2016 498 546 593 636 2016 331 334 344 356
2017 687 747 816 895 2017 367 376 384 390
2018 1,017 1,184 1,381 1,587 2018 396 403 475 475
2019 1,770 1,953 2,124 2,278 2019 419 423 466 485
Sal/Shr Mar Jun Sep Dec P/Sal Mar Jun Sep Dec
2015 1.93 2015 6.8
2016 1.50 1.63 1.72 1.79 2016 10.2 5.5 6.8 7.6
2017 1.87 1.98 2.12 2.30 2017 9.2 11.8 13.6 16.1
2018 2.57 2.94 2.91 3.34 2018 19.2 21.0 34.0 16.8
2019 4.22 4.61 4.56 4.69 2019 11.7 13.4 13.6 12.0
At today’s price of about $44, the Price per Sales on a per share basis is about 9.4, which is as low as it has been since March, 2017 when the TTM adjusted revenue was about $687 million.
As of the most recent quarter (Dec '19), adjusted revenue was $2.278 billion.
After the earnings release, the stock price looked pretty strong, and it looked like Square was about to get a bit higher valuation as their Q4 performance and outlook was good. Immediately thereafter, the coronavirus took over, taking almost half of the market cap back.
The sales outlook (not adjusted) calls for about 30% growth for 2020 (I don’t know how to translate this adjusted revenues other than assuming the same). How will this hold up now that a lot of small businesses may go under? How many of these small businesses and, more importantly, restaurants will see their sales crater? How will the economic stimuli affect this? Will the virus positively affect the Cash App business? Does this situation create new business opportunities for Square?
Given Square’s relatively low valuation, the prospects for share price appreciation look a lot better than the potential additional downside.
I’m struggling deciding what to do about this, because I’ve been adding to AYX virtually all the way down to where it is now and want to continue and bought some more MDB and TTD as well. I feel AYX is my best bet. But I would like to stay somewhat diversified among my 10 holdings, and AYX makes up about 21% of my portfolio.
Regardless, I think that we will see serious appreciation in almost all of our companies within a few weeks or a month or two as we get some clarity on what will happen with COVID-19.
Stay safe!
DJ