Opinions on SQUARE (SQ)



Earnings is in a 4 days.

There is alot of bullishness on their cashapp and also bearishness in their small business exposure.

Personally feel that they might not beat earnings Earnings concensus are already negative -0.05 eps compared to their previous quarter of -0.02 (Actual) and 0.13 (Expected)

But even if they were to fall short on earnings, the price might still go up due to percieved bullishness regarding the growth of cashapp

However, i am net short on SQ because

  1. Around 55 percent of their revenue from Q1 was from transaction fees which comprises of at least 50 percent small business and many of which have closed/have decreased revenue or have went bankrupt.

  2. The faster growing side of their business is the subscribtion service it offers to businesses and cashapp users. For the sellers side (businesses). They have mostly waived the fees as mentioned in their Q1 earnings call. For cashapp, I am not entirely sure about this but I would think that most customers use the services without paying a single cent which really does not add much to the overall revenue. (influx of users due to the stimulus money probably use it for free, but they are technically still a new potential customer which is the aim of SQ)

  3. Every p2p transfer actually costs SQ money and i definitely see their profit margin dropping for cashapp.

  4. Their stock platform is subpar and not comparable to most brokers and their BTC platform has a minimal margin and its treated more as a gimmick.

Having said that i cannot deny the meteoric rise in users of the cashapp and this does easily create a network effect and switching cost (of time/convenience) and even if these free users do not result in revenue now, they might in the future.

Do tell me if i missed anything. (most of these info are gathered from their Q1 earnings from their investors relations webpage under Q1 2020 Investor relationssquareup.com/us/en/about/investors

I m net short but am not putting a large amount at risk due to a major bullish sentiment on cashapp and as seen in q1, even though they were short on earnings by a large amount, the price just shot up.

submitted by /u/jerklewd
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