Look For Square To Spin Off Cash App & Go Public

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Square, Inc. provides payment and point-of-sale solutions in the United States and internationally. The company's commerce ecosystem includes point-of-sale software and hardware that enables sellers to turn mobile and computing devices into payment and point-of-sale solutions.

I’m not an investor and missed my opportunity to be an owner in the company back in March when the entire broader equity market sold off. It was a great opportunity because I have no doubt that Square is a Disruptor in its field by challenging traditional banking services being offered. And at the heart of the disruption is Cash App.

Square is positioned to not only grow into new markets, such as mobile payments, but also take share away from larger financial service firms. Square started to displace traditional money management and banking services through their services like payroll management, invoicing, and business loans from Square Capital. For example, their Square card for merchants gives sellers immediate access to cash after a sale. In addition, Instant Deposit and Cash Card have been among the largest contributors to growth of their subscription and services revenue.

Last quarter, Square reported quarterly earnings which beat Wall Street. But probably more important was their Cash App which had 24 million monthly active customers back in December, was up 60% on a year-over-year. But what got me excited was what they had to say regarding Bitcoin. Back in April of 2018, Square allowed customers buy and sell bitcoins via its Cash App in all 50 U.S. states. Last quarter, Square reported bitcoin revenue of $178 million between Oct. 1 and Dec. 31, with gross profits of $3 million, up 50 percent over the prior two quarters. The company reported a year-end profit of $8 million on $516 million in yearly bitcoin revenue.

That was the issue on Kenneth Hill’s mind as the Rosenblatt Securities analyst sat down to downgrade Square’s rating, believing its “EPS estimates remain as pessimistic as ever.” However, Hill was confronted with information which required a change of direction.

“The disconnect between near-term EPS expectations and price performance initially set us to work on a downgrade note. As we did the work to support a downgrade thesis though, we found more to the long-term story than we anticipated,” Hill commented.

With Square, as Hill found out, it is all about the Cash App, whose potential, Hill says, “can't be overlooked.”

“We were forced to re-evaluate the opportunity set and our valuation methodology, as we see Cash App revenue (ex. bitcoin) increasing by more than 3x over the next 5 years,” the analyst added.

Source

While the average price target on Wall Street for Square is $80, Kenneth Hill has a $121 price target over the next year. Meanwhile, KeyBanc analyst's Josh Beck moved his target to $125, which is the highest on Wall Street.

Now according to MoffettNathanson analyst’s Lisa Ellis she thinks Cash App is worth between $27 billion and $30 billion in enterprise value, which is more than the rest of Square's other businesses and see in five to seven years, Cash App will have 60 million users…possible generating $5 billion in revenue.

Established in 1998 as Confinity, PayPal had its initial public offering in 2002, and became a wholly owned subsidiary of eBay later that year. But eBay spun off PayPal in 2015 to unlock additional value. Square will do the same thing wit Cash App in the future. For now, the chart suggest to buy Square on a pull back to the weekly demand at $102.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advice. Do your own research before making investment decisions.

Posted Using LeoFinance



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