Stock price when the opinion was issued
SQ is now trading at 31x times' Forward P/E. In the 2Q, SQ’s revenue grew 25% to $5.53B, beating the estimates of $5.1B and EPS was $0.39 beating estimates of $0.37. The cash app users remain solid, up 15% to around 54 million monthly activities. We think the share price overreacted somewhat because of overall gross profit growth deceleration from 32% in Q1 to 27% in Q2, and expected to further decelerate to the 21% range. The gross payment volume (GPV) also decelerated significantly to only 12% growth compared to more than 20% last year. The balance sheet is strong, with net cash of around $600M. Overall, the quarter was okay, but a deceleration in growth in operating metrics worries investors. However, we think the Square payment ecosystem is solid, we think SQ is a HOLD for now. Block's healthy revenue growth and improving trends for operating margin should pave the way for profitability, despite decelerating near-term volume growth. Management raised guidance again to deliver Ebitda of $1.5 billion for 2023, a gain of $25 million vs. a loss of $115 million previously, even as some operating expenses from 1Q were pushed forward. Diversification of revenue streams is positive, with each vertical software offering now generating more than $100 million in annualized gross profit.
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Loves that it's a platform business. Plays in a space that competitors are too big for or the space is too small. Ability to build technology and adapt revenue streams with the times. Proven to execute extremely well. Has gone head to head with AMZN and won. Performance has been great, though an up-and-down ride at times. Can hold for a long time. No dividend.
Much better buying opportunity and growth prospects than the Mag 7.
Has been downgraded, but managers are too strong for that. He'd buy on this weakness.