IB Net Payout Yields Model

Square: Valuation Challenges Unrelated To Adjusted Revenue

Square beat Q3 estimates.
The company will quit reporting adjusted revenues due to communication from the SEC.
The end result is a focus on bottom line metrics pointing towards the stock trading at a max value.
Square trades at 63x '20 EBITDA guidance.
Along with the Q3 reportSquare (SQ) offered a lot for investors to absorb. The fintech saw the core business beat estimates while the removal of weak Caviar made the comparisons difficult. All while the company is moving away from reporting adjusted revenues due to SEC guidance causing further confusion. My investment thesis still has the stock overvalued based on the $31 billion market cap and adjusted revenues of $2.5 billion, suggesting investors should let all of the revenue confusion shake out before finding the stock interesting.
Read the full article on Seeking Alpha. 
More commentary - WhoTrades
Update - November 26

Macquarie's Dan Dolev starts Square with an Outperform rating and $105 price target, or more than 50% upside. The suggestion is that an already expensive stock goes from a $30 billion market cap to $45 billion. Anything is possible, but investors should question why the mobile payment processor is worth all-time highs as revenue growth slows and adjusted revenue was only targeted at $2.5 billion. 

Investors should fade any rallies. 

Disclosure: No position mentioned. Please review the disclaimer page for more details. 


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