1. In both 2019 and 2020 there are one-off adjustments below the Operating Profit line that do not represent regular earnings
- in 2019 there was a gain from the sale of an asset group
- in 2020 there was a revaluation of their shares in DoorDash following its IPO
2. Secondly, their Bitcoin Revenues and Costs should really be reported on a Net basis otherwise they massively distort the apparent Revenue growth and Cost structure
- SQ earns very little money on those Bitcoin Revenues
This is the Revenue breakdown with Bitcoin reported Gross
- which gives the impression of high growth . . .
. . . but with collapsing Gross Margins
A more realistic representation of the business is that they are actually seeing lower Revenue growth . . .
. . . at a declining rate from the past . . .
. . . but with increasing Gross Margins
- which unfortunately must have some upper limit
Adjusting the Income Statement for Bitcoin on a Net basis has this effect in 2019 . . .
. . . and this result in 2020
- note the rapid escalation of the Operating Costs
- and the lack of Operating Profits and Net Income
- even as the growth rate falls
We cannot find a way to support the current high stock price with future earnings when we attempt to project out the current operating parameters
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