Stock Review of the Day
Stock:  SQ (Square)
Summary:  ON SALE

Score:  13/20
MOS:  66%
Share Price:  $158
Sticker Price:  $461

Square is a financial services, merchant services aggregator, and mobile payment company based in San Francisco, California.  They market software and hardware payments products and has expanded into small business services. The company was founded in 2009 and currently have over 3,800 employees.

They generate revenue through four channels:

1.  Transaction fees – 74%
Square charges 2.6% + $.10 per transaction (average fee).  In comparison, PayPal charges 2.9% + $.30 per transaction, and Stripe charges 2.9% + $.30 per transaction.  Similar to credit card companies, transaction fees make up the majority of the revenue.

2. Subscription fees – 19%
Square offers software subscription products including appointment management, payroll management, email marketing, and rewards programs that range between $15 and $45 per month and are focused on small businesses.

3.  Hardware – 2%
Square sells hardware products including payment terminals and card readers that range in price from $10 on up to $800.  These are one-time purchase items which are also focused on small businesses.

4.  Bitcoin – 5%
You may also buy bitcoin through Square and the platform charges you about 1.76%.  Coinbase is one of the most popular cryptocurrency platforms on the market and they also charge about 1.76%.

When you take a step back, the revenue break down for Square not only provides you with a great perspective on the most lucrative channels (fees and subscriptions) but this is also quite similar to other companies.  Business models that take a small percentage of the transaction are low friction and highly lucrative.  In other words, most customers don’t complain about the fees because they are so small.  Subscription services especially SaaS are highly lucrative and scalable.  Adding a recurring revenue model through a software is typically a smart play.

On Monday, the Motley Fool released an article titled “Ignore Trump and Biden; This stock is a Buy No Matter Who Wins.

This article was referring to Square.  In general, the FinTech (Financial Technology) industry has prospered under both Democratic and Republican presidents and Square is a company that is friendly for both consumers and small business owners.

Their revenue is up 64% and their profit is up 28% this year alone.  On top of that, their stock price is up 150%.

With a score of 13/20, the financials are looking strong.  With a MOS of 66% (Share Price of $158 vs Sticker Price of $461) this stock definitely has some upside potential.

What do you think?

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All stock reviews are for entertainment purposes only. Reviews are not financial advice.

Blog Post Author
Sean Tepper