|Bid||62.81 x 3100|
|Ask||62.66 x 1200|
|Day's Range||62.13 - 63.21|
|52 Week Range||49.82 - 101.15|
|Beta (3Y Monthly)||2.93|
|PE Ratio (TTM)||N/A|
|Earnings Date||Nov 5, 2019 - Nov 11, 2019|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||84.06|
Back in 2014, JPMorgan’s Jamie Dimon warned that Silicon Valley was coming to eat the banks’ lunch. The technology companies are now starting to chow down. , a virtual interface on the iPhone to help keep track of spending and a physical titanium card for fashion victims.
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Square (NYSE:SQ) was trading at $82.3 in the second week of July. In a matter of one month, Square stock has slumped by 23% to current levels of $63.3. The sharp decline has been triggered by the company's second-quarter results and softer guidance for the third quarter.Source: Shutterstock However, I believe that the market has overreacted on the results and guidance. The decline in Square stock is a buying opportunity because of positives in the quarterly results and other triggers that can reverse the stock sentiment.Overall, the SQ stock is worth buying in the broad range of $55 to $65.InvestorPlace - Stock Market News, Stock Advice & Trading TipsSince the second-quarter numbers and guidance have come out, the entire focus has been on the near-term negatives. In particular, decelerating growth is a concern noted by the analyst community, in general. If you take a moment to consider the upsides, though, Square gets way more interesting. A Closer Look at Square StockSquare Inc has established a robust omnichannel platform that delivers "end-to-end" service. One of the key targets of the company has been to attract merchants with a GPV in excess of $500,000. It is worth noting that the company had 19% sellers with annualized GPV in excess of $500,000 in 2Q17. * 15 Growth Stocks to Buy for the Long Haul This increased to 22% in 2Q18 and further increased to 26% in 2Q19. As the number of big merchants increase, it is likely that the company's total and adjusted revenue will swell higher.Also worth noting is that SQ reported adjusted EBITDA margin of 7% in 2016, 14% in 2017 and 16% in 2018. For the second quarter, the company's adjusted EBITDA margin was 18.7%.Further, considering the mid-range of the guidance, the company is likely to report an EBITDA margin of 18.3% for 2019. I see sustained margin expansion as a positive. While product development cost is likely to remain high, EBITDA margin expansion can potentially sustain as sales volumes trend higher.The company also announced the sale of food ordering platform Caviar for $410 million. While this will have a negative impact on revenue, the sale of loss-making Caviar is likely to be positive in the long-term. It allows Square to focus on omnichannel commerce, financial services and expansion in international markets.Square reported cash & equivalents of $1.2 billion for June2019. Considering the sale of Caviar, the company's cash buffer is likely to be around $1.5 billion.While analysts worry about a deceleration in growth, I believe that the cash buffer will be utilized for inorganic growth in focus areas. Therefore, it is too early to assume that the company is moving towards a lower growth momentum and the stock should trend lower.I remain bullish on the company's cash app. For the second quarter, the cash app generated $135 million in subscription and transaction-based revenue.Further, the cash app generated $125 million in Bitcoin revenue. It is worth noting that Bitcoin revenue surged to $125 million in 2Q19 from $37 million in 2Q18. With the cash app having a Bitcoin deposit feature, the app is likely to attract individuals. The growth in cash app revenue is already worth noticing. From $1 million in the second quarter of 2016; revenue has surged to $135 million (excluding Bitcoin). With multiple monetization sources, I am bullish on robust revenue growth to sustain. Final Words on Square StockConsidering the factors discussed, I don't see a near-term growth deceleration as a concern. Square stock should trend higher from a market perspective beyond the near-term growth concerns.It is worth mentioning that Square continues to work towards expansion in the financial services sector. This includes a potential banking license in the future. The company's debit card for small businesses is also packed with attractive features and is likely to witness traction.Overall, Square stock is in a buying zone. I expect organic and potential inorganic growth in the next 12-18 months to take the stock higher from current levels.As of this writing, the author did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 15 Growth Stocks to Buy for the Long Haul * 5 More Cloud Stocks With Plenty of Potential * 5 Clean Energy ETFs to Buy for 2019 The post This Market Overreaction Is Just One More Reason to Buy Square Stock appeared first on InvestorPlace.
In late 2018, Square Inc (NYSE:SQ) saw its surging stock get flattened, falling over 35% from its all-time high of $101.15. Like many growth stocks, SQ stock bottomed out in December. However, despite delivering a favorable earnings report, the company's stock has still found resistance at the $80 mark.Source: Shutterstock After a second-quarter earnings report, in which the company beat expectations for both revenue and EPS, the stock suffered a sharp sell-off. So What's the Story With Square?One reason for SQ stock's selloff was their announcement that it would sell off Caviar -- its successful food service business unit. Depending on how you do the math, Square either sold Caviar for a tremendous profit, or a tremendous loss, but that's just money.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThis deal gives Square the opportunity to reach more customers. Because of Caviar, Square now processes about 25% of their revenue via food service. And the sale of Caviar integrates Square with DoorDash.The bottom line for Square is that Caviar never seemed like a business they were in for the long haul. How Is Square Expanding Its Ecosystem?Despite selling off Caviar, Square is still very interested in expanding its reach beyond traditional payment processing.The payment processing sector is becoming crowded. Competition will continue to increase as bigger companies seek to enter the space. Square is addressing this issue by building out add-on services such as inventory management, shipping, payroll and lending to make the cost of switching become higher for their existing customers.This is consistent with Square's stated desire to offer services that will allow them to compete with traditional banks. However, one of the most intriguing elements of Stock's strategy to differentiate themselves from an increasingly competitive field has been their embrace of cryptocurrency, in particular bitcoin. Square Is Making a Big Bet on BitcoinAs businesses wrestle with their need to accept bitcoin as a form of payment, Square is clearly trying to establish a leadership position in this space. Investors may struggle to see the role a payment processing company like Square or PayPal (NASDAQ:PYPL) has in the crypto revolution.After all, the whole point of cryptocurrency is its emphasis on security. But as Square's CEO Jack Dorsey said in a 2018 interview, the internet is looking for a native currency to free it from the traditional regulatory and legislative restrictions that can slow down startup companies like Square.The gamble seems to be paying off. In its second-quarter earnings report released on Aug. 1, Square reported its crypto-friendly Cash App made $125 million in revenue from bitcoin, a significant leap from the $65.5 million Square raised from bitcoin in Q1.Not surprisingly, the increase in revenue led to a higher gross profit -- to the tune of $2 million as opposed to $832,000 in Q1.And other companies are taking steps to ensure they have a place at the table. Visa (NYSE:V) and PayPal are actively looking to partner with Facebook on its proposed Libra cryptocurrency. SQ Stock Is Displaying Conflicting FundamentalsA quick review of the fundamentals gives investors a picture of a stock that is sending mixed signals. On the one hand, SQ stock is up nearly 40% from its 52-week low of $49.82. On the other hand, the stock is down over 35% from its 52-week high of $101.15.Square has also seen its consensus rating move from a Buy 30 days ago to a "hold" rating, and has seen its consensus price target dip from $86.80 to $84.69.When you consider that Square is in an increasingly competitive space and has yet to turn a profit, you can understand why investors might be a little concerned about the company's valuation. What Direction Is SQ Stock Headed In?After a favorable earnings report, SQ stock made a move last week that broke a trend of higher highs and higher lows. Some people may worry about how Square will protect its turf while expanding its customer base, particularly after the company abandoned Caviar which was, if nothing else, a cash cow.However, as their Cash App (Square Cash) and other services move it into the individual financial services space, the company has a well-defined ecosystem that gives it the opportunity to reach businesses and customers.In fact, the Cash App has exceeded expectations by growing from $1 million in quarterly revenue to $135 million in quarterly revenue over a three-year period and that doesn't include bitcoin. And with a price target that is setting SQ stock up for a 30% increase from its current level, there looks to be tremendous upside.As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 15 Growth Stocks to Buy for the Long Haul * 5 More Cloud Stocks With Plenty of Potential * 5 Clean Energy ETFs to Buy for 2019 The post Square Bets Big on Bitcoin appeared first on InvestorPlace.
(Bloomberg) -- When Swedish banking firm Klarna became Europe’s most valuable financial technology startup last week, it was only the latest sign that digital finance has escaped the troubles afflicting legacy lenders.Its latest fundraising gave Klarna, which facilitates online installment payments, a $5.5 billion valuation. European fintech companies raised $3.3 billion in venture capital in the first half of 2019, up from $1.9 billion in the same period last year, according to data compiled by CB Insights. In contrast, an index of European Union banks has dropped 39% the past 18 months.“Investors are drawn to it because it’s the perfect blend of a huge, mature industry which, empowered by technology, can deliver vast returns, far in excess of what you see if you’re starting up out of nowhere,” said Ben Brabyn, chief executive officer of Level39, one of Europe’s largest fintech accelerators, in an interview.Here are a few other recent industry highlights and what to watch out for next.Fintechs Flout Brexit WorriesLondon fintechs defied the Brexit gloom that descended on the the U.K. Transferwise Ltd. announced a funding round in May that valued the eight-year-old company at $3.5 billion, up from $1.6 billion in 2017. A few weeks later, online bank Monzo closed a new funding round doubling the startup’s valuation to more than $2.5 billion. Meantime, Revolut Ltd., while being eyed by regulators for possible compliance lapses, expanded into stock trading. They weren’t all winners: shares of peer-to-peer lender Funding Circle Ltd. have plunged 65% this year.IZettle’s Surprise PayPal SaleIt was the midnight deal that surprised many -- PayPal Holdings Inc. purchased iZettle AB for $2.2 billion in May 2018 the night before the Swedish startup had planned to price its shares in an initial public offering. Stockholm-based iZettle competes with Twitter co-founder Jack Dorsey’s Square Inc., and Canada’s Shopify Inc.Adyen Soars After IPODutch payments processor Adyen NV hit headlines for two reasons last year. First, in February, it was announced the Netherlands-based firm would replace PayPal as EBay Inc.’s global checkout service. Then in June, it held a billion-dollar IPO and saw its shares surge 90% in the first day of trading. The company, whose clients include Netflix Inc. and Spotify Technology SA, is now valued at 20 billion euros ($22.4 billion)Worldpay’s $35.5 Billion DealAs one of the world’s biggest payments firms, Worldpay Inc. handles about $1 trillion annually -- similar to Chase Paymentech. When Fidelity National Information Services Inc. said on July 31 it’d completed its $35.5 billion acquisition of the company, data compiled by Bloomberg showed the combined business will be the world’s biggest in the processing and payments industry. It wasn’t a bad day for Ohio-based Worldpay, which less than two years earlier had been a British enterprise snapped up for 7.7 billion pounds ($9.3 billion) by U.S. merchant acquirer Vantiv.What’s Next?N26, the German mobile bank backed by billionaire Peter Thiel, announced in July it had extended its most recent fundraising round to $470 million, at a valuation of $3.5 billion. The company is expanding from Europe to the U.S., betting it can attract users from established lenders and credit card providers with free accounts, fewer fees and phone alerts.Other companies to watch include Revolut, which despite multiple run-ins with controversy remains exciting to investors after it held one of the biggest fundraising rounds for a European fintech last year, and app-based banks Monzo and Starling, which are attracting customers at a rapid clip.Further down the line is the U.K.’s online lender Zopa Ltd., which its CEO Jaidev Janardana said in July could potentially hold an IPO in 2021.“The valuations are encouraging but they’re not enough. They’re just an early indicator. The important numbers to watch are the customers,” said Brabyn. “We all need to step up to demonstrate the public value of what we do.”To contact the reporter on this story: Ali Ingersoll in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Giles Turner at email@example.com, Nate Lanxon, James HertlingFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The gains in Shopify (NYSE:SHOP) stock continue. SHOP stock now has risen 176% in 2019 alone. It has more than tripled from December lows.Source: Shutterstock Shopify stock has had a truly staggering run. The company has added nearly $25 billion in market value in seven and a half months. And all the while, observers -- myself included -- have argued that SHOP stock is a bubble, or at the very least significantly overvalued.Yet Shopify stock marches higher regardless, climbing the proverbial "wall of worry." And as I have written of late, the stock could keep going. Fulfillment plans offer another reason for bulls to see even greater profits down the line. More broadly, investors have shown a willingness to pay up for growth.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Safe Dividend Stocks for Investors to Buy Right Now I still believe Shopify is overvalued. I called it out last month as one of 10 stocks set to crash at some point. The question after another blowout earnings report is when that point might come -- and what will be the catalyst. Could a Market Decline Hit SHOP Stock?The most obvious catalyst would seem to be a broad market decline. After all, when markets struggled in the fourth quarter of 2018, SHOP stock did as well.That said, SHOP didn't perform that badly. It declined 16% in the fourth quarter. But the NASDAQ Composite fell 18%. Square (NYSE:SQ), another high-growth, high-priced, small business play, dropped 43% over the same period. And some of the pressure on Shopify stock came from a secondary offering which the company priced at $154.Meanwhile, markets have seen some pressure at times this year, yet SHOP has been largely immune. Its only real weakness in 2019 came in June, after Roth Capital and Wedbush downgraded the stock on back-to-back days. (Those firms, too, cited valuation concerns.) There have been enough periods of market volatility this year to rattle Shopify stock again. So far, they've had little, if any, impact. SHOP Stock's Rising CompetitionAnother potential point of pressure could be on that competitive front. Square is looking to challenge Shopify as it integrates its 2018 acquisition of Weebly. Facebook (NASDAQ:FB) unit Instagram has launched In-App Checkout, which allows brands to sell products directly through that platform. And of course, Amazon (NASDAQ:AMZN) offers small businesses enormous reach as well.But it's tough to see anyone taking down Shopify any time soon. Going forward, the nature of digital platforms is that it gets harder for competitors to gain as those platforms grow and network effects take hold.And it's not as if anyone can simply enter the market and succeed. As Barron's reminded readers last month, eBay (NASDAQ:EBAY) acquired GSI Commerce for $2.4 billion in 2011 in an effort to capture the same market as a then-nascent Shopify. eBay sold the business for $925 million four years later, and it was split up by the new owners in 2016.Shopify's growth may slow; in fact, it almost certainly will given its exponentially increasing reach. At least at the moment, it's hard to see rivals gaining much, if any, market share. The Cycle TurnsI still believe there's one key risk here that investors haven't properly discounted: the macroeconomic cycle. Small businesses are notoriously at risk when a recession hits.Obviously, investors aren't terribly worried about this fact right now. Cyclical stocks on the whole are trading at low multiples -- yet SHOP stock keeps gaining. As cyclical fears have rattled U.S. stocks at points this year, SHOP has been unaffected.This is a company that still gets over 40% of revenue from subscriptions rather than its take rate on the sale of goods. The number of customers matters. And if the businesses paying for those subscriptions fail -- whether because the economy turns or because more entrepreneurs exist than perhaps should at the moment -- Shopify's growth will slow dramatically. What Can Stop Shopify Stock?These risks are real -- but, honestly, they don't look all that likely right now. At the very least, they're unlikely to change the narrative surrounding Shopify stock any time soon.So what does? Maybe nothing. SHOP stock is expensive, but it has been expensive for all of 2019. Investors keep buying it. That may stop at some point -- but I'd hardly be willing to bet against SHOP stock in the meantime.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Real Estate Investments to Ride Out the Current Storm * 7 Marijuana Penny Stocks to Consider for Those Who Can Handle Risk * 7 Safe Dividend Stocks for Investors to Buy Right Now The post What Stops the Gains in SHOP Stock? appeared first on InvestorPlace.
It's easy to make the bear case for Uber Technologies Inc (NYSE:UBER). The current UBER stock price -- even after a 14% decline over the past two sessions -- still suggests a market capitalization near $70 billion. Yet Uber isn't close to profitable.Source: Shutterstock In fact, Uber lost a staggering $5 billion in its second quarter, according to last week's earnings report. To be fair, much of that loss was due to stock-based compensation following the company's IPO. But even on an Adjusted EBITDA basis, Uber lost some $656 million in the quarter. In that context, $70 billion seems ridiculous.That said, this is a company with a path to growth. At least some of the current losses are coming from investments in areas like UberEats and Uber Freight. Those investments eventually will generate returns, or so the company hopes. And with a real opportunity in self-driving vehicles, in particular, growth can continue for decades to come -- with profitability likely to follow at some point, and possibly some point soon.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Safe Dividend Stocks for Investors to Buy Right Now But the long-term question remains: how much profitability? While the UBER stock price has fallen off a single earnings report, that's the question that really matters. And there's a very real probability that the answer is much worse than Uber shares suggest, even as they trade not far from post-IPO lows. The CEO's Case for UBEROn Friday, one day after Uber earnings, CEO Dara Khosrowshahi gave a lengthy interview to CNBC. The appearance certainly seemed like damage control from the notoriously PR-focused company, as the UBER stock price fell despite some good underlying news in the quarter.There's one passage from the roughly 20-minute interview worth calling out in the context of understanding the fundamentals behind the UBER stock price. CNBC's David Faber asked Khosrowshahi if he agreed that it was an "uphill battle" to get the company to cash-flow positive. Here's how the CEO responded:This is a 20% revenue margin business at 50, 60 plus percent scale. Every single year we add $15 billion of gross bookings at 20% margin - revenue margin. So that's essentially $3 billion of revenue that we're bringing in house. And you know, put that against a $656 million quarterly loss. And you see that with a couple of years of $3 billion-plus revenue coming in, you're going to be able to cover those losses. I am very, very confident of this. Can Uber Technologies Inc Hold Pricing?From a broad standpoint, that's the right answer. Uber will be able to grow to the point where Adjusted EBITDA is positive.Growth stocks across the market have soared this decade on the backs of similar models. And companies -- including both Uber and rival Lyft (NASDAQ:LYFT) -- have taken advantage of that fact to go public earlier than in the past.It's worth going through the exact metrics Khosrowshahi cites because they can also highlight the bear case for UBER stock right now. First, he notes that the business is at 20% "revenue margin." What this means is that Uber has a "take rate" around 20% of bookings, or the price that riders pay. (According to figures from the 10-Q, take rate actually was about 19% in Q2, excluding a one-time driver benefit in conjunction with the IPO.)That metric alone is a worry for Uber. Per its own filings, Uber's take rate has steadily declined in recent years. The key factor has been competition from Lyft and China's Didi Chuxing, who has expanded into Europe and Australia.And one real concern is that it will keep declining. After all, competition can create a "race to the bottom." More importantly, drivers may not be able to survive paying Uber 20% of the fare, while also maintaining and fueling their vehicles and being properly compensated for their time.The argument from Uber bears is that the model doesn't work. The company is funding its business through incentives to consumers and incentives to drivers. That combination can't last forever -- unless Uber (and its rivals) want to keep burning cash. While those promotional incentives have stabilized across the market, per post-Q2 commentary, that may not hold. The risk here is that there's always going to be someone out there willing to undercut the incumbent players. Does Operating Leverage Lead UBER Stock Price Higher?The CEO then notes that the company is running a quarterly loss (which, to be clear, is Adjusted EBITDA) of $656 million, or about $2.6 billion a year, while growing revenue at a $3 billion clip. In theory, that should narrow losses rather quickly.After all, this is a platform company, or at least believes that it is. And the reason platform stocks (think Etsy (NASDAQ:ETSY) or Match.com (NASDAQ:MTCH)) generally trade at high valuations is that incremental margins are huge. Once the platform is built, each extra dollar in revenue comes with minimal costs. So raising pricing, as Etsy did, or simply growing usage both lead profitability to move almost exponentially higher in a very short amount of time.$3 billion in revenue probably can't cover a $2.6 billion hole. $6 billion probably can -- at least if platform economics hold. But here, too, there are questions. New riders on the Uber platform, for the most part, need a corresponding amount of new drivers. (Existing drivers can increase their utilization, but only to a point.) And acquiring new drivers costs money. Either Uber has to market to them, incentivize them, or pay them.For most digital stocks, incremental margins are huge. For Uber, it's not clear that they are. The company's own financials don't show it: Adjusted EBITDA loss more than doubled year-over-year in Q2.To be fair, the company has kept up its spending as it has entered new markets, and looked to grow UberEats, in particular. The longer-term risk, however, is that Uber always will have to keep up its spending. Other BetsThere are real concerns as to whether the core ride-sharing business can ever really be profitable. After earnings, bulls and analysts pointed to a notable improvement in contribution margin from ride-sharing. The figure, according to the earnings slides, jumped to 8% from -4% in the first quarter. Some of the loss, then, is coming from spending on UberEats and autonomous driving, in particular.Again, this is a company worth $70 billion. GrubHub (NYSE:GRUB) is worth $6 billion. As Ian Bezek pointed out last week, Square (NYSE:SQ) sold Caviar to DoorDash for just $410 million. UberEats is going to have to be absolutely dominant to support even a fraction of the current UBER stock price.Uber Freight is intriguing, but faces stiff competition in an industry that has huge numbers of incumbent brokers (many of whom have similar technology). And the autonomous efforts don't necessarily solve Uber's problems: driverless cars certainly would have lower costs, but they'd also have commodity pricing, as MarketWatch contributor Rich Alton pointed out this week.The core distribution business has to reach profitability -- and likely material profitability -- for the UBER stock price to do anything but keep falling. That's not guaranteed. Khosrowshahi's math works on paper. The key question for Uber is whether it will work in practice.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Real Estate Investments to Ride Out the Current Storm * 7 Marijuana Penny Stocks to Consider for Those Who Can Handle Risk * 7 Safe Dividend Stocks for Investors to Buy Right Now The post The Biggest Long-Term Question for Uber Stock appeared first on InvestorPlace.
PayPal (PYPL) introduces instant transfers to bank accounts via Venmo which is likely to aid its competitive edge against the other tech giants trying to strengthen presence in the banking sector.
The Federal Reserve got some push to build a real-time payments network from the gas station lobby and, indirectly, Facebook.
As early August handed the stock market a vicious sell-off, Square (NYSE:SQ) stock fell harder than most. In the wake of a disappointing earnings announcement, horrified SQ stock investors endured the deepest two-day drop in the past three years.Source: Shutterstock The ongoing tariff war certainly didn't help the Square stock price, but there has also been concern surrounding the sale of the company's Caviar food-delivery business.Are the doubters and short-sellers justified in their anxiety, or is this really just a buying opportunity in disguise?InvestorPlace - Stock Market News, Stock Advice & Trading Tips No Caviar for Me, Thank YouAnnouncing the sale of Caviar wasn't exactly what the mainstream media pundits wanted to hear, it seems. Characteristic of the negativity was Jeff Cantwell of Guggenheim, who went so far as to terminate his designation of "best pick" for SQ stock and, worse yet, to slash his price objective from $94 to $80. Ouch! * 8 Dividend Aristocrat Stocks to Buy Now No Matter What Why the negativity? According to Cantwell (speaking on behalf of Guggenheim), "We view this as Square hitting the reset button on an important part of its business model." For their part, Square's management countered with the statement that selling Caviar to DoorDash will provide "clarity in how we operate and a clearer purpose and alignment for our planning, investment, and work moving forward."Personally, I tend to concur with the company's assessment of the Caviar divestiture. SQ is known as a payment app, plain and simple; I don't see any particular need for Square to try to become the next Amazon (NASDAQ:AMZN) and be all things to all people.Offering food delivery would have been a nice ancillary addition to the company's business model, but I don't see it as integral and as a prospective investor, I'm perfectly fine with Square sticking to doing what it does best. Besides, Square acquired Caviar in August of 2014 for only $44.3 million worth of stock, and then flipped it to DoorDash for $410 million worth of cash and stock -- not a bad five-year turnaround, I must say. Analyzing the SQ Stock DropYou might recall the intense selling pressure surrounding Square stock on the day after the second-quarter earnings announcement; the share price tumbled 15%, and by the time the bleeding subsided, SQ was more than 30% below the stock's 52-week high.Besides the Caviar sale, investors were shaken by the company's guidance, in which Square's full-year outlook was lowered from a net loss of five cents to nine cents per share, to six cents to 10 cents per share. In other words, the expected losses are projected to be somewhat deeper than Square's management had previously thought.To focus solely that is a mistake, I feel, as there are other metrics to illustrate the company's profitability. Take, for instance, Square's adjusted Q2 earnings of 21 cents share, an astounding 61.5% increase compared to the same quarter from the prior year. Also consider that during that same quarter, Square's revenues were $1.17 billion, signifying a very impressive 44% increase compared to the previous year; moreover, Square's adjusted revenues for the quarter were $563 million, marking a considerable increase of 46% over the prior year.Besides, the guidance disappointment might not tell the full story, as Square CFO Amrita Ahuja explained:I'd urge you to remember that this quarter, we've announced the transaction with Caviar. And so we will update you post the closing of this transaction, which we'd expect to happen later this year, with respect to guidance for the rest of the year.Thus, investors shouldn't be surprised to see a "revision of the revision" in the near future when it comes to that seemingly disappointing guidance. The Takeaway on Square StockGuidance isn't everything, and losing Caviar isn't the end of the world for Square; I'm standing by my overweight rating on SQ stock and am proud to say, "Good riddance, Caviar -- I never had a taste for you anyway."As of this writing, David Moadel did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 8 Dividend Aristocrat Stocks to Buy Now No Matter What * 7 Stocks to Buy to Ride the Vegan Wave * 4 Safe Stocks to Buy Amid Trade War Turbulence The post Prepare for Sizable Gains with Square Stock appeared first on InvestorPlace.
Twitter CEO Jack Dorsey is an astonishingly gifted, driven, and “super weird and strange” guy, as he has put it, whose actions — and inactions — may determine the fate of the free world.
Last week, DoorDash, one of America's largest food delivery companies, announced that it was buying Square's (NYSE:SQ) food delivery business, Caviar. Incredibly, DoorDash is paying just $410 million for Caviar. This is terrible news for Uber Technologies, Inc. (NYSE:UBER) and other companies in the food delivery space.Source: Shutterstock It adds to a series of other problems Uber has been having lately. These include permit issues in London, layoffs, and a report suggesting that ride-sharing services make traffic congestion worse. There's a lot going on with UBER stock and Uber stock price, and it's not good news. A Fire SaleIf you're tempted to dismiss the importance of this situation, think again. Caviar was supposed to be a nice opportunity for Square. Analysts had modeled Caviar and Square's food platform as a meaningful value driver in coming years. Since announcing the Caviar sale last week, SQ stock has plummeted from $81 to just $64.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThat's because Square ended up dumping Caviar for just $410 million. That's peanuts. In fact, it was less than 2% of Square's market cap. Industry leader GrubHub (NASDAQ:GRUB) is valued at more than $6 billion. What can we take away from this? * 10 Stocks to Buy on the Trade War Dip Square was willing to give Caviar away for next to nothing simply to stop the bleeding. Square had previously tried to sell Caviar in 2016 but couldn't find a buyer at an agreeable price. Reportedly Square wanted to get rid of Caviar due to its excessive losses, and apparently decided it was finally time to bite the bullet and dump the property. Square didn't report Caviar's financials separately, so we don't know just how bad the overall financial performance was. Uber Stock: Public Versus Private Company DynamicsSquare's move to unload Caviar at any price is another demonstration of an important economic theme at the moment. If you're a private company funded with venture capital money, you can do anything you want right now. Want to buy millions of electric scooters that will end up inevitably getting thrown in dumpsters and lakes? Not a problem. Companies like Bird and Lime have gotten plenty of VC funding despite an absurd business model.But if you're Uber, you probably don't want to go into electric scooters to compete. Why's that? Because public investors actually care about profits and losses. Call them old-fashioned if you wish, but the public markets still look at business metrics other than the revenue growth rate. Square proved this by dumping a fast-growing business for barely any consideration at all.Square showed that a business that is losing gobs of money with no signs of imminent improvement is effectively less-than-worthless. It was better to get out altogether than keep taking losses, regardless of how much revenue it brought into Square overall.Uber stock may find that it faces similar problems in the new businesses that it has been trying to launch. When you're competing with venture capital folks who are willing to run massive losses indefinitely, it's hard for a company that is accountable to public shareholders to compete. What Becomes of Uber Eats?It's worth asking if investors have built too much optimism into UBER stock because of its ownership position in Uber Eats. Publicly-traded industry leader GrubHub has gotten walloped. GRUB's stock has lost half its value over the past year. Meanwhile, we saw what happened to Square stock last week as they announced the Caviar sale.Other competition is floundering as well. Smaller rival Waitr (NASDAQ:WTRH), which focuses on delivery in smaller urban areas, has gotten smashed. The stock has lost nearly two-thirds of its value recently, and will likely lose more going forward. If Caviar is only worth $310 million, is Waitr still worth $300 million? Almost certainly not. All these falling stock prices will make Uber stock owners question their valuations for the Uber Eats part of the business going forward. UBER Stock VerdictUBER stock investors already had reason to be nervous. Last week, Uber announced the layoffs of 400 members of its marketing team. And Uber didn't limit the cuts to the United States. It fired employees in places as far-flung as Colombia and Ghana. This is not a good sign at all, as Uber needs international growth to distinguish itself, particularly as long as Lyft (NASDAQ:LYFT) remains a pesky rival in the core American market.And now Square's efforts to dump Caviar call into question the value of Uber Eats. Square stock has long been highly-valued on the basis of future growth potential. That's just like UBER stock. Square's management just gave you a loud clear sign that it needs to focus on profits rather than revenue growth and the stock market reacted by furiously unloading Square's stock.If Uber goes down a similar path - and firing marketing employees is a troubling sign - it will greatly curtail Uber's blue sky potential going forward. I believe UBER stock has potential for long-term investors willing to endure a few years of losses. But if the market forces the company to pivot to profitability now, it could come at the loss of huge future markets such as food delivery and effect UBER stock price.At the time of this writing, Ian Bezek held no positions in any of the aforementioned securities. You can reach him on Twitter at @irbezek. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Buy on the Trade War Dip * The 5 Highest-Rated Dow Stocks Right Now * 4 Cybersecurity Stocks to Buy for Long-Term Gains The post Uber Stock Owners: Be Very Afraid of What Square Just Did appeared first on InvestorPlace.