4. Square Inc (NYSE:SQ)
Then there’s Square Inc (NYSE:SQ), a fintech company behind the popular Cash App service that allows users to transfer money to one another via an app. Cash App has been a game changer for the company, recording revenue of $5.97 billion in fiscal 2020, out of which $4.57 billion was revenue from Bitcoin transactions. The company also added the possibility to buy stocks via Cash App last year, which will likely benefit the company’s growth. Moreover the application is currently only available in the US and UK, where it had 36 million monthly active users at the end of 2020 (up by 50% on the year), which means that the international expansion opportunity can be quite massive. Square Inc (NYSE:SQ) has also recently obtained an industrial banking charter, which will allow it to benefit more from providing lending services (currently it has to use a third-party bank for this).
There were 89 funds from our database long Square Inc (NYSE:SQ) at the of December, holding $8.82 billion worth of shares, which represents an increase from 73 investors with stakes worth $6.50 billion a quarter earlier. Here is what Avory & Co has to say about Square, Inc. in their recent Investor Letter:
“At Avory, this principle was tested. Take Square for example, a top holding for years and one of our top holdings heading into the COVID crisis. The implications for Square seemed dire at first glance as physical retailers using the Square point of sale were unequivocally going to struggle. However, those who actively research the company knew that Square had a pristine balance sheet reinforced by a $1B capital raise on March 2nd. The point-of-sale market was still in the early innings of going from legacy to 21stcentury technology. This meant a quicker displacement of legacy with Square well positioned given its financial strength and diversified customer base. This was not the same circumstance for a competitor like Toast, which laid off 50% of its workforce in April. Square’s software and entrepreneurial driven culture allowed the company to create new products like curbside pickup, ignite Cash App usage through a well-designed Payroll Protection Program, and sign-up new customers that were in dire need of digitizing their stores with Square Online. This type of execution from Square is nothing new and somewhat predictable to long-standing researchers of the company.
Now, making assumptions on Square’s potential is one thing, but tracking it in real time provides the data required to create conviction. Despite a large segment of Square customers struggling, Square’s fundamentals were drastically improving.”
