Common perception of Square is that it's unlikely they'll be able to live up to original expectations. Jack Dorsey is no more the next Steve Jobs than Grant Hill was the next Michael Jordan.[1] That being said, if people are still willing to give them tons a cash it gives them the ammunition to make another go at their Moon Shoot, by all means take the money.
So probably a good move for Square, and probably not the wisest use of cash for the investors. That being said, it's tough to find a good home for cash these days thanks to global QE.
As for me, given the choice between putting money in the 10Y notes at 2.6% (pretty close to inflation over the last 30 years), Square, SP500 fund (19.69 PE or 5.1% yield) or putting it under you mattress, I'd opt for some mix of the mattress and SP500 index fund.
>> "it's tough to find a good home for cash these days thanks to global QE."
Can anyone recommend a good "Explain It Like I'm 5" resource to describe what's happening with qualitative easing and it's microeconomic effects for the individual investor?
Inventing something new here, shitty ELI5: Hey, someone bought all of the product we have (bonds), and buys all of the product we can think of having. What are we going to do with all this money? Grow more or spend it on a huge party.
If you look at established companies that have reasonable valuations, and look at what they do, it's completely insane.
There are large airlines, major oil companies, major media companies...at one point I worked for the world's largest private R&D organization, who also happened to manage most of the DOE National Lab system and is barely worth this much.
The value these companies seem to have appears to have almost nothing to do with their business fundamentals, and everything to do with how much somebody is willing to pay for a pretty egg.
Your analysis is incorrect because you are basing it on Price/Earnings, whereas the market is pricing Square on Price/Earnings Growth. Square is replacing hundreds of incumbent POS vendors & is growing quickly. Airlines, oil companies, etc aren't generally growing that quickly.
Max earnings growth is almost impossible to predict with any kind of accuracy. The analysis is basically # of PoS on the planet * avg. current earnings per PoS and that becomes some mythological possible upper bound, or some other nonsensical analysis. Even if they're doubling earnings every year, exponential growth never lasts, yet valuations will reflect some kind of continuous exponential growth into infinity.
The point is, even if Square hit some kind of real P/E that made them a $6bil company, they wouldn't be doing anything nearly as impressive or substantial as actual companies who are today worth $6bil.
As in, you haven't seen old POS terminals replaced with new ones?
At least in the US, you're going to see lots of this happening in the next year. Starting October 2015, the major card brands have dictated that merchants will be liable for fraudulent transactions processed via the magstripe (as opposed to EMV).
That means lots and lots of new terminals. Square's also got an EMV compliant reader coming out soon.
> Square's also got an EMV compliant reader coming out soon.
Chip and signature though, not chip and PIN. I can't see anything from square about the liability for chip and signature, but it's normally on the merchant, not the bank.
Square has recently slowed down hiring. I'm not sure what that means but internally they're not growing at the rate they once were. Some engineers are holding their breath.
I'm seeing many comments about Sqaure not living up to expectations or slowing down.
I guess I don't see that. Where I live I'd have to guess that 95% of food trucks, coffee shops, and smaller restaurants use square. That's not including the markets where square is pretty much exclusively used by all vendors.
I do agree that 6B is insanely high and most likely not what they are actually worth. However I wouldn't say they are slowing down.
Food trucks are not a big business. If you've captured the entire food truck payment system, you're still not likely to be worth $6bn, especially not if you're taking pennies on each transaction. It probably also doesn't take so much money to manage such a business. I know someone who works at Square and it's your typical high flying startup wasting money on pretty offices, amenities, and other non-business related expenses, all while losing $100m a year with nary an idea for how to ever reach $6bn in valuation. The people giving out this money to Square aren't stupid, so there's probably something we don't know, but then again the same kind of people gave a lot of money to Color, RockMelt, Quora, Foursquare and some other less memorable walking zombies.
Square's value is that it reduces the overhead for economic participation. If you believe that in the future there will be a more networked economy with a larger number of small businesses and individual tradespeople, then Square is a great bet.
Most of the claims I've seen about Square slowing down have acknowledged that they are dominating the small vendor market but claim that this market isn't proving to be profitable enough to sustain their growth. I haven't really double checked the numbers on this and it sounds like you probably know more than me here but it seems possible that Square is in the situation of having lots of customers but not having the right customers to make their business model work.
So probably a good move for Square, and probably not the wisest use of cash for the investors. That being said, it's tough to find a good home for cash these days thanks to global QE.
As for me, given the choice between putting money in the 10Y notes at 2.6% (pretty close to inflation over the last 30 years), Square, SP500 fund (19.69 PE or 5.1% yield) or putting it under you mattress, I'd opt for some mix of the mattress and SP500 index fund.
[1] http://www.complex.com/sports/2013/05/the-complete-history-o...