Square's Rising Competitive Edge that Gives It a Great Future
Online trading brokers have popularized stock trading through features such as direct access trading platforms. These have made the stock market more accessible to the layman. But one of the most important aspects of trading stocks is identifying which of them has great promise.
Square Has Had a Bright Q4
Analyst Matthew Cochrane believes that Square ($SQ) has a competitive advantage that is continuing to rise. He looks to the 2018 Q4 results and the full-year results that were released by the end of February 2019. Q4 saw the top-line and bottom-line growth of Square continuing to rise substantially. The adjusted revenue increased to $464 million, which was a 64% year over year increase. There was also a 97% rise in adjusted EBITDA, growing to $81 million.
Gross payment volume, which represents the number of total purchases that Square's sellers helped facilitate, rose to $23 million which is a 28% rise. And to add the toppings to this delightful news, Square also plans to keep launching new and innovative products aimed at helping small businesses. Another factor facilitating growth is the favorable ecosystem in which Square operates.
New Products and a Lucrative Market Segment
So let's have a look at what Square plans to launch. These products come under the subscription and services revenue segment. Cochrane points out that this segment had a 144% year over year rise in Q4, with revenue topping at $194 million. So it's a segment with immense promise, and Square has a range of products in this lucrative segment:
- Square Card
One of these is the Square Card. This business debit card provides merchants with quick access to their earnings from sales. It also enables the merchants to get their personal and business expenses separated. When the card is used at another point of sale with Square, a 2.75% cashback comes the way of the cardholder. The seller does not get charged the usual 2.75% fee for the debit card. This is crucial since around 40% of the holders of Square Card were without a business debit card previously.
- In-App Payments SDK
The next product by Square is a software development kit known as In-App Payments SDK. It enables sellers to facilitate mobile app payments with Square. It may be late to the party since competing payment processing companies had already released this feature. But now that Square finally has a product like this, it can process payments either physically where the sale takes place, in-app or online.
- Square Payroll
The third product is an app developed for the payroll solution Square Payroll. This can help employers take care of payroll taxes and overtime payments. Employees too can do a lot of things with this app such as viewing pay stubs, choose how they like to be paid, whether through Cash App. Square Payroll has been quite a valuable means for acquiring customers since a third of new businesses using Square Payroll were new to the brand in 2018. So there is a lot to keep the customers coming in for Square. With the company being able to increase its first time customers, its competitive advantage with its products and favorable ecosystem is actually rising.
The content provided here is solely for informational and educational purposes and does not constitute an offer to sell or a solicitation to buy any security or instrument which may be referenced upon the site, or an offer to provide advisory or other services by TradeZero in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. Investors are advised not to rely on the information contained in this writing to make an informed investment or financial decision. TradeZero explicitly disclaims all liability for any action taken based on any information contained in this writing.