Is Square stock a buy?

Hello everyone, welcome to this master class hosted by Xillion. Xillion is your platform to help you become financially independent in 10 years or less. We have tools and financial advice available to you 24/7 so that you can make the best financial decisions regarding all aspects of your money, whether it’s 401K investments, real estate, spending, or any other financial matters. Our goal is to help you achieve financial independence within 10 years.

If you haven’t already, please check us out at xillionapp.com or search for Xillion on Google. In this master class, which we host twice a week on Tuesdays and Thursdays at 3:00 p.m. Pacific Time and 6:00 p.m. Eastern Time, we discuss in-depth financial concepts that you wouldn’t find anywhere else. Typically, we focus on companies that have the potential to become quite successful in the long run but may not yet be household names.

Today, we will discuss Square, now known as Block. Let’s jump right in. We will follow a particular set of charts and data available within Xillion. This is the Xillion homepage. You can create your account, get one month free, and access all this information. Once you log in, go to the Analyze product and search for the company you’re interested in. In this case, we’re looking at Square or Block, with the ticker symbol SQ.

Let’s talk about what Square, now Block, is and its business model. Block has multiple product lines. One is Square, the foundational piece that started with the payments card reader. Then there is Cash App, which facilitates peer-to-peer payments. Other initiatives include Spiral, a Bitcoin-focused project, Tidal, a music service acquired before the pandemic, and TBD, which focuses on crypto.

My first encounter with Square was back in 2009. I was in Boston, outside MIT, at a food truck that started accepting card payments using a small Square card reader plugged into the audio jack of an iPhone. This was revolutionary compared to the bulky credit card machines previously used. Since then, Square has launched many products, becoming an enterprise resource planning (ERP) tool for small businesses, offering services from payment processing to payroll management.

Cash App, managed separately within Block, started as a peer-to-peer payment service and has expanded to offer features like buying Bitcoin and stocks, and even tax filing. Spiral focuses on decentralized technologies, while Tidal and TBD have their own niches within the Block ecosystem.

Looking at Square’s financial performance, over the last three months, the stock is down about 16%. It reached a 52-week high but has come back down. Year-to-date, it’s slightly down, and over three years, it has significantly decreased. Despite this, Square’s long-term potential remains high. The market cap is $40 billion, and the company has substantial room for growth.

The price-to-sales ratio is 1.76, indicating that Square is relatively cheap compared to its peers. The growth rate has been impressive, with a 50% compounded annual growth rate over five years, despite a slowdown post-COVID. Profitability remains low as the company reinvests earnings into growth, focusing on value-added services with higher margins.

Square’s leadership, including co-founders Jack Dorsey and Jim McKelvey, remains strong. Jack’s visionary approach, despite some concerns about his focus on crypto, continues to drive the company forward. The product diversity, transparent pricing, and innovative services like offering loans to small businesses based on transaction data, contribute to Square’s strength.

In summary, Square’s worst-case scenario is becoming a company like PayPal, while the best-case scenario could see it becoming a modern JP Morgan. The long-term growth potential is significant, and the leadership team is capable of driving the company to new heights.

Thank you for tuning into this master class. If you have any questions, feel free to ask now or contact me later. Don’t forget to join us for the next master class, where we will explore another high-potential company. We hold these classes every Tuesday and Thursday. Thank you so much for joining.