Square Inc (NYSE:SQ) stock reported its very first earnings report as a public company on March 9. Investors were initially upbeat on reported revenue, as Square stock beat expectations, but the stock gave up its gains a day later. Square stock is down about 11% since the start of the year, but there is a lot to like about the company that could send shares higher.
With the stock price just below its initial public offering (IPO), investors might want to consider taking a look at Square stock. Here’s why.
Square’s mobile payments business is soaring. In the fourth quarter of 2015, gross payment volume increased 47% to $10.2 billion worth of transactions on behalf of more than two million merchants (Source: “Square Earnings Show It Can Grow Beyond Just Mobile Payments,” Bloomberg, March 9, 2016.) Total net revenue grew 49% over the previous year to $374 million, and the company is guiding revenue for 2016 in the range of $600 million to $620 million.
Square also still has low market penetration, so there is lots of room for growth here. Square has about two million merchants out of the approximately 28 million small businesses in the U.S., Square’s main target. (Source: “Small Business Trends,” Small Business Administration, accessed March 14, 2016.)
About 92% of Square’s revenue comes from its transactions, but the company is making forays into other areas to broaden its revenue stream.
The company has added new features to its service, such as payroll, small business loans, analytics, inventory management, and online marketing.
Software and data product revenue was only $22.0 million in the fourth quarter of 2015, but it grew 52% sequentially from the third quarter. For the full year, it grew an astounding five times over revenue from 2014, up to $52.0 million.
So far Canada and Japan are the only two countries that Square has expanded its services into. Square has stated in its annual report that it is planning to grow its international business and enter new markets. Squares business model of targeting small business should also appeal to international markets and provide lots of room for future growth.
The Bottom Line on SQ Stock
Square stock’s price is sitting below the company’s initial public offering (IPO) price, which could be an opportunity for investors. With the company growing at a frenetic rate, its plans for international expansion, and broadening revenue streams, investors may want to take a closer look at Square stock.