Square

Evan Sohn | June 21, 2019

How is it possible that Square is trading at nearly 40x revenues? In fact there is an analyst who thinks that Square stock can hit $125 in just 12 months. His revised price target is 45% higher than his previous target. How in the world is this possible? Is it just fluff?
If you thought Square was just for dog walkers and lemonade stands – well you are way wrong.

In fact, Square is rapidly growing with merchants with more than $125,000 in annualized gross payment volume. That group of merchants grew 42% year-over-year. Square’s newer product – Square for Restaurants is signing up merchants driving over $650k in payment volume on average.
Square is rapidly innovating in multiple directions. As you see from the articles below Square is now in the payroll business and competing with Venmo. While their processing rate might not be as competitive as those being offered by traditional payment processors, I wonder how long before their value-added services outweigh their added processing costs.

I hope this is a wake up call for traditional processors to pick up their pace of innovation. I also recently read that Square withdrew their application to become a bank. Perhaps they realize that being bank might slow their innovative pace.
Let me know what you think.

Best,
Evan