SQ - Embedded Expectations Analysis - 2019 04 01
Square, Inc. (SQ:USA) is currently trading at historical highs relative to UAFRS-based (Uniform) Earnings, with a 112.4x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management has concerns about Cash App's appeal, the Square Card's utility, their ability to build a cohesive ecosystem of financial tools, and their rate of product innovation.Specifically, management may be exaggerating Cash App's appeal to younger consumers, its adoption as a primary spending tool, and its growth among developers and small businesses. Additionally, they may be downplaying concerns about competition and monetization, and may be overstating Square Card's utility to new businesses, small businesses' ability to access funds, and their satisfaction with Cash Card's development. Moreover, they may lack confidence in their ability to build a cohesive ecosystem of financial tools that can handle managed payments for internal and external customers. Furthermore, they may be exaggerating their rate of high-quality product and feature launches, and may be concerned about discussions with regulators, seasonality, and the capabilities of their Installments feature.
Square is a commerce ecosystem that combines software with hardware to enable sellers to turn mobile devices and computing devices into payment and point-of-sale solutions. With the company's offering, a seller can accept payments via magnetic stripe, Europay, MasterCard, and Visa, or Near Field Communication; or online via Square Invoices, Square Virtual Terminal, or the seller's website or app. Also, sellers can gain access to reporting and analytics, next-day settlements, digital receipts, payment dispute and chargeback management, security, and Payment Card Industry compliance. The company's Cash App enable individuals to send and receive money electronically to and from individuals and businesses.
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