Evaluating Square (SQ)

Square Enables Businesses to Accept Payments

Square’s Cash App Enables People to Pay Each Other

How the Square Cash App Makes Money

Putting This All Together

Square 2019 Adjusted Revenue

  • Transaction Revenue — Square takes roughly a 1% cut of every transaction on its terminals. This is called a “take-rate”.
  • Software and Services Revenue —This includes the money Square makes from its Cash App, as well as the money it makes from Square Capital (where it takes a fee from lending money to businesses)
  • Hardware Revenue— This is the revenue Square generates by selling its hardware terminals
Square’s 2019 Adjusted Revenue. “Adjusted Revenue” removes transaction costs and costs from Bitcoin and Weebly (a website builder that Square owns). Prior to Q3 2019, this was how Square presented its revenue.

Square Adjusted Revenue Overview

Why Investors Are Excited About Square

  • Will be the primary beneficiary of the transition from the continued electronification of payments (cash-to-card)
  • Is uniquely positioned in the marketplace to serve SMBs that have been underserved by traditional merchant acquirers
  • Will be increasingly valued as a software company as software-like services make up a larger and larger portion of its revenue
  • Will continue to see big growth from “Cash App”, which they view as a leader within the Peer 2 Peer payments space
  • Will continue to be the brand leader for point-of-sale (POS) systems across the world

Why Investors Should Be Concerned About Square

Profitability Concerns

There Are Too Many Point-Of-Sale Companies

These Challenges Will Hit Square More Because It Serves SMBs

Going Upstream Will Be Challenging

Stock Compensation

Concluding Thoughts

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Technology Investor

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Lawrence Han

Lawrence Han

Technology Investor

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