Thread by @CapitalWiseman

Fintech SuperApp with twin fast growing ecosystems Square $SQ is targeting a $160B TAM

Price: $262.5
Market Cap: $120B
52 W L – 52 W H: $56.12 - $283.19
452.92M shares outstanding

$SQ has 2 large opportunities in the #fintech space - Merchants (e.g. payments) via Square App and Consumers via Cash App (e.g. P2P transfers, #btc trading)

$SQ: Merchants (Sellers) and Consumers (Buyers) solutions address a $160B market; creating the largest footprint, with low penetration currently at < 3% in both

$SQ Square app = Merchant TAM is $100B made up of transaction fees, software for POS, Credit and seller services
$SQ was a hardware only "dongle" payments company with a flat fee for payment processing, but that changed with loans, software and services for merchants

$SQ Square app (Merchant) covers a wide- range of financial services from point-of-sale to lending and payroll for Sellers

$SQ Square App: Subscriptions and Services are increasing in revenue mix – which improves margin from low 20s to high 30s

$SQ Square App run-rate of ~$2.55b exiting Q4 2021E (+21% CAGR)
This business competes with other payment processors such as $FOUR $PYPL Stripe, etc.

$SQ Seller Summary: unique assets, difficult to copy, risk and fraud detection technology and is at scale

$SQ Cash App’s (Consumer) is a leader amongst Neobanks, going from ~1mm MAUs exiting 2015 to over ~36mm MAUs today
This competes with other Consumer fintech companies such as $IPOE / $SOFI and $FUSE Money Lion

$SQ Cash app has 3X the transacting users on a monthly basis compared to Robinhood and 10X that of $IPOE ($SOFI)

$SQ ~34% CAGR in Cash App MAUs over 2020-2022, with Cash Card penetration moving from ~27% exiting 2019 to ~34% by end 2022E

$SQ Cash App ecosystem exiting 2021 at a ~$2.5b net revenue run-rate, with Cash Card increasing in mix. This compares to $900M for 2021 $IPOE

Bitcoin market volume and $SQ Cash App’s market share. Cash App’s net revenue from #btc of ~$45mm in Q1 2021

$SQ Cash App Summary: Differentiated platform allow customers to easily send, with low CAC of $5 / customer, spend, store and invest money

$SQ has Gross Profit – Growth at Scale – and is growing 50% CAGR. With blowout quarterly earnings Q4 2020 beat by $1B revenue and Q1 2021 another beat

$SQ has a strong financial profile, is growing quickly and has tailwinds from macroeconomic factors
EPS growth forecasts are at 60% CAGR until 2025 and revenue more than doubling in 3 years

$SQ EBITDA valuation relative to peers in the payment space is rich but growth is dramatic

$SQ Cash app valuation relative to peers in the Consumer #fintech space implies upside even compared to new entrants such as $FUSE and $IPOE as well as #BNPL fintech companies such as $AFRM

$SQ Valuation Summary: Discounted Valuation Relative to High-Growth Payments / #FinTech Peers

$SQ Risks: Macroeconomic for TX growth, #BTC trading volumes, very competitive fintech space (payments has over 500 companies and consumer fintech has over 1000 entrants)

$SQ still does not have a strong international presence (especially in Asia, where incumbents are strong)

$SQ Bull and Bear thesis summary: Strong growth in both ecosystems, execution risk with near term on #btc

$SQ: Summary and long thesis #fintech
1. Large market (twin focus of merchant and consumer) at $160B
2. Growth at scale $9.5B rev, 29% GM, growing at 50% CAGR
3. Multiple growth levers to support a dominant position (leading #fintech) company by 2025

Please let me know your thoughts 🙏

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