SQ - Embedded Expectations Analysis - 2021 10 13
Square, Inc. (SQ:USA) is currently trading at a historical high relative to UAFRS-based (Uniform) earnings, with a 146.9x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about the Afterpay acquisition integration, the Seller ecosystem growth potential, and their organic innovation strength.Specifically, management may lack confidence in their ability to capitalize on e-commerce and in-person expansion opportunities through the Afterpay acquisition and successfully integrate its model into their business, particularly into Cash App and the Seller platform. Moreover, they may be overstating Square Seller's growth potential, as well as the transferability of the solution from small merchants to large companies. Finally, management may be exaggerating their ability to sustain a strong legacy of organic innovation.
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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