SQ's new card for businesses

Investment Analysis Clubs Saul’s Investing Discussions
1

https://www.marketwatch.com/story/square-stock-rises-after-i…

https://www.barrons.com/articles/square-stock-to-rally-with-…

Two analysts have commented on the opportunities presented by SQ’s new debit card for businesses.

The first report says that only 4% of a $50B in Gross Payments Volume is using a card now. One interesting thing about the card is that is can be used to incentivize businesses (and consumers who have the personal SQ debit card) to use other SQ merchants. So as more people get the card there are increasing advantages of being in the SQ ecosystem. I like how SQ continues to identify and offer new products and services that 1) benefit its customers, 2) reinforces the benefits (and adds to them) of the SQ ecosystem, and 3) benefits SQ by providing new revenue generation. As a shareholder, you gotta love all three because it not only provides more growth for SQ financially but it also makes SQ more sticky to its customer base.

Saul and others have sold or reduced their SQ allocation in the portfolios. I don’t see a reason for this. Growth has continued to accelerate and I think there is still a huge market opportunity in front of SQ as it continues to disrupt the more and more aspects of the financial industry. Earnings are due out in about a month on 2/27/2019. We will see if their growth acceleration continued in the last quarter of 2018 and we will see how much their announced spending increase was really increased…

Chris

Chris

42 Likes
2

I don’t see a reason for this.

I still hold a full position in SQ, Chris, but I can see why others might drop back in their Square holdings. I suspect the big reason is Market Cap, with SQ MCap being much higher than other fast growers popular here.

Generally I prefer small cap companies just because they have so much opportunity for share appreciation. Each ‘win’ in operations, new apps, etc., can have a leveraged effect on share price.

On the other hand, to say that a large-cap can’t be a continually strong grower is missing the mark. For example, if SQ makes a mistake along the way, the share price isn’t likely to be cut in half, which in reality, most other of our fast growers could easily find themselves in that very boat. If MDB or PSTG, just for example, were to lay a couple infertile eggs, the share price could be affected drastically, depending on the size of the egg. I also think your post is timely, as it makes perfect sense for enterprise to follow the trend of bits as wealth, including the use of debit cards. Meanwhile SQ keeps on turning up win after win.

So I can see both sides of the argument, but have chosen to keep on following SQ as an owner, since in my view, they keep firing on all cylinders and have so far managed not to make any major mistakes. While the world changes from paper dollars to electronic bits, I think it’s good to own the leader in that particular niche.

My biggest question arises from Saul’s opinion here. He’s so seldom been wrong that I am reluctant to go against his intuition. That’s what makes a market. And in the end, I fish alone. (Don’t we all?)

As always, I maintain the right to change my view at any time, but will make every effort to give notice and reasoning when that happens, just in case anyone cares. For now, it’s “Let Square run.”

Dan
long SQ @ 15.6% of holdings and rising

12 Likes
3 
"On the other hand, to say that a large-cap can't be a continually strong grower is missing the mark. For example, if SQ makes a mistake along the way, the share price isn't likely to be cut in half, which in reality, most other of our fast growers could easily find themselves in that very boat. If MDB or PSTG, just for example, were to lay a couple infertile eggs, the share price could be affected drastically..."

Dan, SQ was cut in half in the past on December 24.
1 Like