The market doesn’t think SQ can move up market, and if it can’t, growth is going to slow soon because it’s going to run out of small merchants.
exactly what was said about SHOP at lower prices.
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Just to put into perspective, SHOP was up and down a lot and pretty much went no where for several months towards the end of 2017/early 2018. Stock kind of fell out of favor here, not sure if that is when Saul sold out or not. I continued to hold and it has since more than doubled from that point. I will continue to hold SQ here as well. I personally don’t see the market cap being an issue as well, is 30B really what you would consider “huge”? I can easily see SQ getting to 100B in the near future and that is more than a triple from here.
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…here’s a yellow flag: organic subscription revenue growth.
Q1 2018: 98%
Q2 2018: 127%
Q3 2018: 117%
Q4 2018: 112%
(109% for 2018 altogether)
Q1 2019: 97%
The trend is steadily down…
I find it hilarious that we ding a company for almost 100% growth…think about that! I understand that’s it’s trending down, but I won’t sell a stock because organic subscription revenue growth is 97%…but trending down. Anything over 50% is phenomenal! We know growth rates can’t stay over 100% for very long, they have to come down, so this shouldn’t be any surprise.
Bear, I understand why you’re doing this, you and many others here have 10 stock or less portfolios so you have to be very picky on which stock makes the grade and it’s things like this that allow you to compare these “best of” stocks and pick what you feel are the top ones that have the fewest potential weaknesses.
I just can’t do that myself, there’s no way I will judge a stock growing the best part of it’s business at 97% as lacking in any way. I want to own it, and prefer to keep it, and a portfolio of about 20 stocks, so that I can. Full disclosure, I bought more SQ today!
I think SQ’s lack of stock price appreciation of late is just that it’s out of favor with the market, this happens all the time with every stock, and we can’t predict it. Some act on it, and do well doing so, that’s just not me.
SHOP is a perfect example of a stock that went out of favor (with the market and this board) because of “slowing growth”. I found that funny as it was still well over 50%! SHOP’s stock price stagnated for a period, but in the last 4 months, it’s doubled! I’m glad I held, because I know had I gotten out, I would not have been able to get back in in time to catch the quick double, and I feel I’ll also be glad to have held SQ in a few years.
There used to be a lot of talk about coiled springs on this board, that doesn’t happen anymore, so many here exit a position “because the stock hasn’t done anything for 6 months”, I think that’s a mistake.
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Just seems like it’s more so momentum than actual operating results.
You’re absolutely right, Alpha, it is completely momentum and market sentiment in the short term, if you invest longer term, though, the actual operating results will win out (as long as they continue). It’s the whole voting machine / weighing machine thing.
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…here’s a yellow flag: organic subscription revenue growth.
Q1 2018: 98%
Q2 2018: 127%
Q3 2018: 117%
Q4 2018: 112%
(109% for 2018 altogether)
Q1 2019: 97%
The trend is steadily down…
With much respect for Bear, I will riff off of what foodles said, and point out the quarter over quarter comparison shows a 1% drop for Q1.
I’m sure someone has a longer history of the organic revenue that may tell a different story.
Enjoy,
Brian
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Reading through earnings and Listening to the call transcript, I didn’t find anything worrisome with SQ.
In fact I really like their continued execution on
- Finding customers pain points and introducing successful products addressing that
- Build eco-system of products and self building network effects among business and consumers through these products (or services).
- Making it extremely easy for customers to self onboarding.
SQ also talked about how they are growing success in mid market (layer above mom & pop shops I guess) and that about half of business is now mid market customers.
And international opportunity and successes.
I really like the call even more than the earnings report.
SHOP vs SQ
As many here said, SHOP was in doldrums for a while… I didn’t sell out even when Saul exited completely.
Now it seems SHOP has next 3 years good news already priced in and SQ seems to be doghouse.
FWIW… I am reducing SHOP (down from 3% size a month back to 1.5% now) and holding SQ (~5% after today’s drop).
(I did buy some booster calls for SQ in last few weeks which for sure I am going to lose some money - but that happens in bets like that.)
I may add to SQ when price starts growing again.
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so many here exit a position “because the stock hasn’t done anything for 6 months”, I think that’s a mistake. but what time period would you use? Because if almost everything else is going up and your chosen stock isn’t, that does seem to indicate “mistake” to me." Doing nothing" is of course better than going down ,so maybe flat should be a case in itself.
6 months is a short period of time but in a roaring bull I follow 3,6, and 12 month progress. But I know of no magic number , and as you say good stocks fall out of fashion for no clearly discernible reason.
I did miss the SHOP rebound but OTOH the money derived from the SHOP sale went into stocks that mostly did very well.
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I am tempted to buy dip, until seeing this:
https://www.cnbc.com/2019/05/02/facebook-recruiting-partners…
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SHOP is a perfect example of a stock that went out of favor (with the market and this board) because of “slowing growth”. I found that funny as it was still well over 50%!
…
There used to be a lot of talk about coiled springs on this board, that doesn’t happen anymore, so many here exit a position “because the stock hasn’t done anything for 6 months”, I think that’s a mistake.
Although I’m relatively new to this board compared to many, it’s going to be interesting watching this dynamic play out with each and every holding - because the law of diminishing returns will not be violated - and how people here react.
–JC
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That’s not a good reason to avoid buying SQ. It’s a way for people to pay one another through WhatsApp. Venmo and PayPal would be more at risk.
And besides, new competition threats such as this is rarely something that should be a driver to sell or not buy.
Square has much, much bigger obstacles than this.
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I also see that they plan to give this crypto currency to people who look at ads. Talk about a way to decrease ad effectiveness.
If only this whole crypto currency nonsense would go away. Remind me again why we need to exchange our dollars for a crypto currency pegged to the dollar?
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Hey Mouser,
Let me first say I in no way am saying I have a better method of investing than Saul, Bear, Chris, Tinker, Dreamer, or probably anyone else on this board, but I don’t follow anyone’s moves blindly and I have my method that works for me.
so many here exit a position “because the stock hasn’t done anything for 6 months”, I think that’s a mistake.
- but what time period would you use?
There is no magic time period, I stay in the stock as long as the thesis and business fundamentals are still holding up. Which around here is HIGH GROWTH, if a company continues to grow at the rates we see with the companies discussed on this board, which is 40-100+%, the stock price WILL eventually come around, of that I have no doubt, and I would prefer to just hold what I have, or even add more.
Because if almost everything else is going up and your chosen stock isn’t, that does seem to indicate “mistake” to me.
I don’t look at it as a mistake, just a timing issue. Most every stock is going to go through good and bad times, sometimes those will coincide with the market’s moves, sometimes not.
Many here seem to have a pretty uncanny ability to get out of one stock that goes down and put the proceeds into another that shoots up (at least per the posts). It definitely helps when the whole market is going up as you have a much better chance of moving that money into another winning position (the last 4 months, for example). But remember that to do that you have to be right twice, on the sell decision, and the buy. And if what you sell goes up and what you buy goes down, you’ve really just shot yourself in the foot.
A lot of folks here have managed to continually move into most of the best performing stocks in the market pretty consistently for years now! So I’m not saying it can’t be done, just that I can’t invest like that, so I typically hold longer, and have more positions than the top investors here. I’ve lagged others here on my returns until this year (yay!).
I did miss the SHOP rebound but OTOH the money derived from the SHOP sale went into stocks that mostly did very well.
I’m glad you deployed into stocks that also did well, I think most here did, but I’m sure there are some that either held the cash looking for a dip or bought things that didn’t perform as well. I’m not advocating a TMF-like “never sell” mantra. Again, I’m not as concentrated as many here, but I’m not going to sell out of stocks that are growing at over 50% (or 97%!), even if the growth rate is coming down.
SHOP once again is having it’s day in the sun, and I have a strong feeling SQ will be basking in it again, too, in time…I just don’t know how long that will be, but I’m willing to wait. After all, what’s easier than doing nothing.
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I thought about reducing my stake in SQ, but have decided not too.
Here is why.
Is Square able to move upmarket?
GPV customers >$500K
1Q 2019 24% x 22.6B = 5.43B
1Q 2018 20% x 17.8B = 3.56B
5.43/3.56 = 52% growth
GPV customers < $125K grew 24%
Square is moving up market.
Square is starting to slow on small customers
Square GPV is more than 4x Shopify, and growing about the same
Square GPV of largest customers is bigger than all of Shopify GPV
Shopify has advantage for businesses wanting a large sales presence online
SQ has the advantage for all service businesses, plumbers, electricians, hanyman, cleaners, etc
SQ has the advantage in the food service industry
Room for both SQ and Shopify, huge market, each has their own strengths.
Very impressive SQ can grow the same rate as Shop being 4x bigger.
Cash app did 2.5x transaction this quarter, will be able to monetize more.
Moving into Japan
Launched new square online store
Launched square invoices as a dedicated app, remote payments
1.6B cash
Jim
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Bear, I understand why you’re doing this, you and many others here have 10 stock or less portfolios so you have to be very picky on which stock makes the grade and it’s things like this that allow you to compare these “best of” stocks and pick what you feel are the top ones that have the fewest potential weaknesses.
I just can’t do that myself, there’s no way I will judge a stock growing the best part of it’s business at 97% as lacking in any way. I want to own it, and prefer to keep it, and a portfolio of about 20 stocks, so that I can. Full disclosure, I bought more SQ today!
The premise (and valuation) of most of these investment is predicated on accelerating growth; if that changes so will the valuation.
tecmo
…
Jimbo:
A name I inherited over the years.
My idea on Square is that they have a great niche in the small and a little bigger, largely underbanked market of entrepreneurs, some of whom will become large users of many services.
It’s almost festival time here in Maine, thousands of people visit these events which always have arts and crafts and artwork concessions booths galore. Just about every vendor has square on an ipad. It’s actually been true for a number of years, lately the anecdotal discussion is that square is expensive compared to alternatives that, so far, haven’t seemed to really penetrate the small vendor market. I don’t know whether there is any merit to the price complaint but Square is in evidence everywhere.
Just sayin.
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I am wondering if Saul is still long this stock? Did not see him commenting SQ earnings since its been released.
Bear, I understand why you’re doing this
Foodles, I really don’t think you do. You think I’m down on Square because it hasn’t done well the last 6 months? I sold in October!
More importantly, you should know that the point of selling something is NOT because something else has been doing better. I never care about the last 6 months for any stock. What matters is always THE FUTURE. I don’t know the future, and I really don’t think I have an “uncanny ability” to find winners. It’s simple math. If I sell PVTL, SHOP, and NTNX, and PVTL and NTNX gain 0% and SHOP gains 80%, the average they gained is 27%. That’s a great thing to do if I in turn buy TWLO and AYX and NEWR, and they’re up 50% on average. Make sense?
Bear
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Bear,
I sold in October!
Yeah, I know when you sold, Bear, that’s really a great thing about this board is many of you post your portfolios and moves every month and are accountable to that (I think I’ve read every post here for about the last 4 years). If my memory serves me, you sold when Sarah Friar left, Jack Dorsey was being compared to Musk with some of his crazy antics, and Left/Citron came out with a short stance on SQ. And that sell turned out to be a pretty good move on your part, congrats! All those things hitting around the same time definitely killed the momentum of SQ stock, and it hasn’t come back yet. In my opinion, those were all short term FUD events that set up a buying opportunity instead, not so smart a move (yet) on my part, but again, I don’t drop stocks as quickly (to my detriment at times, I realize), but if I think it’s a great company, and is still performing, I’ll add, building up my positions to a larger size when things are irrationally down (IMO). I guess I still have a lot of TomE in me. It doesn’t potentially maximize returns, but I’m more confident in the results (long term) than switching horses if not necessary.
You think I’m down on Square because it hasn’t done well the last 6 months?
Not at all, I think you’re down on SQ for the reason you pointed out in your post, that SQ’s organic subscription growth rate has slowed to 97% from the triple digits. I consider that a positive (the 97% part, not the “slowed” part).
I’m not arguing with you, Bear, that my way is better than yours, you obviously did much better than me with this SQ example, I’m just telling you why I did what I did. And again, definitely not advocating anyone else try to follow me, as my returns have been nowhere near as good as your’s or Saul’s or others here over the last few years.
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I’m not arguing with you, Bear, that my way is better than yours, you obviously did much better than me with this SQ example, I’m just telling you why I did what I did. And again, definitely not advocating anyone else try to follow me, as my returns have been nowhere near as good as your’s or Saul’s or others here over the last few years.
Understood. I’m just trying to figure out why you feel this way:
I’m more confident in the results (long term) than switching horses if not necessary.
And again, this:
I think you’re down on SQ for the reason you pointed out in your post, that SQ’s organic subscription growth rate has slowed to 97% from the triple digits.
…shows me you haven’t heard what I’m saying, so I’ll try again. I’m not down on the 97%. In fact, the 97% is neither good nor bad. Because it’s in the past. All that matters is what it will be next quarter, and the next, etc. The market thinks it will be maybe 70%, then maybe 50%, then something like 20%, then maybe single digits, at least within the next few years. You are welcome to believe differently. But you might want to have a good reason why you think the market is wrong.
Bear
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Fwiw, after yesterdays drop, found some cash and brought back in again for the third time in 2 years. Unless something drastic happens or changes within the Company, I will hold this time and unlike Shop where I feel I made a mistake in selling out too early, feel they have room to grow substantially, just need some patience.
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