Summary
The stock is hovering just north of $200, and we believe this is a buying opportunity once again.
The new highly mutated and contagious Omicron variant is already causing travel restrictions.
While it may be a ‘nothingburger’ like the Mu variant, we are starting to see local mask mandates again on top of international concern.
Small business got crushed by COVID and is a critical growth driver for Square, but the shutdowns and reopening were both positive catalysts for Square.
The company’s innovation will drive continued growth.
This idea was discussed in more depth with members of my private investing community, BAD BEAT Investing. Learn More »
Jon Feingersh Photography Inc/DigitalVision via Getty Images Square (NYSE: SQ ) is a stock we have been in and out of over the last few years. This company remains a game-changer in the space. We expect great innovation in the long-term. The Street largely agrees that is why the stock has been bid up and stayed above $200 for quite some time. We are writing today as the stock is hovering just north of $200, and we believe this is a buying opportunity once again, especially with the holiday shopping season now in full swing and the threat of the new Omicron variant scaring the populace and likely to drive increased shopping from home, along with other digital means. While Square benefits from reopening in its small business exposure, it is a major beneficiary of digital transactions as well. We think shares are a buy here, following a recent selloff. Source: BAD BEAT Investing The play
For those interested in trading:
Target entry 1: $208-$212 (20% of position)
Target entry 2: $202-$203 (30% of position)
Target entry 2: $191-$193 (50% of position)
Stop loss: $175
Target exit: $250-$260
Call option consideration: Jun 2022 $220 strike for $23 and again for $16 Discussion
The backdrop
Great things are happening with Square. They are innovating new ways to sell and pay for goods and services, as well as ways to move wealth via the transfer of cash and crypto. They are also assisting small businesses drive sales.
You see this new Omicron scare is interesting. It could be a giant ‘nothingburger,’ much like the Mu variant turned out to be. Or it could be a highly virulent strain the evades the vaccine similar to the Delta variant, with far worse complications. There are already travel restrictions. It all remains to be seen. Square, although helping small businesses and benefiting from the reopening of the economy, saw business boom during the pandemic. Of course, a lot of this was driven by investments in its marketing and business development that included expansion of its exposure to Crypto.
While we feel sub-$240 is a fair entry point longer-term, we had been waiting for closer to $200. It is getting to be that time to buy this fintech disruptor, as it is showing that it is still growing nicely. This was evidenced by the company’s just reported numbers.Again, it is really difficult to apply traditional valuation metrics here as by just about every measure the stock is overtly expensive, though far less so than a few weeks ago. While we have set up a trade that we think will pay off, even if you get only the first leg of the play, we really think the company is best invested in for the very long-term here. With the growth on display, we believe the company will grow into its enormous valuation. Q3 earnings solid Revenues have taken off since Square started dabbling in bitcoin ( BTC-USD ). Crypto has been a big hit for companies that have allowed their users to start buying and selling. In Q3, net revenue was $3.84 billion up 27% year-over-year. Overall, this was a touch lower than consensus estimates. If we back out the crypto transactions, total net revenue in the quarter was $2.03 billion, up 45% year over year. Without bitcoin this is still pretty impressive growth. While the growth is not as major as it was a year ago, you can clearly see that bitcoin is important to the growth of the company.That said, every segment of business is performing well under the Square umbrella. Overall, gross profit was $1.13 billion up 43% year-over-year, and this is strong even if it was down from Q2, which was a huge quarter. Transactions and GPV gross profit Make no mistake, transaction revenue continues to explode to the upside. In fact, revenue from transactions was $1.30 billion rising 40% year-over-year, […]
Protected by Patchstack