Jack Dorsey's idea of a credit card processor company for the masses took off when he launched Square. Now that he has been successful, the competition is increasing and he is using that to his benefit.
NEW BULLISH Plays
SQ - Square Inc - Company Profile
Square is a mobile payment provider for small businesses, including individuals. Anyone can process a credit card transaction through their Square account using their mobile phone, tablet or laptop computer.
There are at lease 6-8 competitors to Square today. Paypal (PYPL) has offered a card reader for your mobile device for a longtime but they do not advertise it that much. This week Square announced alliances that would let restaurants and retailers to use the point of sale hardware from TouchBistro and Vend. The customers from those two providers will now have access to Squares growing portfolio of services including invoicing, analytics, quick deposits and lending services.
Apparently, Dorsey has discovered that partnering with his competition is the best way to corner the market on his services business.
The company recently announced a similar partnership with Upserve, another startup offering its own point of sale service and software for restaurants. Squares services division saw revenue rise 25% sequentially and +130% over the year ago quarter. Square's lending division is one of the fastest business drivers. They extended 34,000 business loans accounting for $189 million in Q2. That was a 23% increase sequentially and +123% from the year ago quarter.
Q2 revenue of $439 million beat estimates for $406 million. Gross payment value rose 42%. The company reported a loss of 8 cents compared to estimates for a loss of 11 cents. They guided for full year revenue of $1.63-$1.67 billion.
Shares spiked on the earnings news to $11.90 an then faded in a bout of post earnings depression. Recent analyst upgrades provided another boost to $12.50. On Tuesday, Stifel Nicholas upgraded the stock from hold to buy.
The last three days Square shares have been rock solid at $12 despite the market weakness. Once we get past Labor Day, if the market turns positive again, I believe Square will retest its highs at $16.
With a SQ trade at $12.25
Buy SQ shares, initial stop loss $11.65.
Optional: Buy Dec $14 call, currently 45 cents. No stop loss.
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