Wednesday, March 14, 2018

Square: More Crypto Insanity


Square (SQ) hit new all-time highs following a segment from Jim Cramer focusing on the stock. The Mad Money host made the odd claim to buy the stock on Bitcoin weakness when Square trades at the highs in part due to cryptocurrency insanity.

The mobile payments provider is trading at nearly $55 for an incredible market valuation of $21.5 billion. Remember that Square only forecast revenues of $1.3 billion this year.

Cramer is 100% right that investors shouldn't own this stock for Bitcoin, but he is clearly mistaken on the reason the stock sells off.

Bitcoin-related sell-offs from Square are buying opportunities from CNBC.

Square has routinely reached peaks due to excitement surrounding the cryptocurrency. The stock sells off when investors realize that the Cash App doesn't even have any meaningful transaction amounts. The average account only spends $12 a month and the stock needs serious transaction revenues from Bitcoin in order to justify the current valuation.

The better way to play Jack Dorsey is Twitter (TWTR).  Nearly the same valuation and much higher revenues returning to growth mode this year.

Disclosure: Long Twitter. Please review the disclaimer page for more details. 


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