By: Steve Smith
Square (SQ) is the ‘other’ company founded and run by Jack Dorsey, but unlike the much maligned Twitter (TWTR), Square’s mobile payment platform has enjoyed strong growth and a quick path to profitability.
For the first quarter, Square’s revenues grew 22% over the year to $462 million, ahead of the Street’s expectations of $451 million. Its platform processed $13.6 billion of gross payment volume, recording a 33% growth over the year.
Square has been pushing its international expansion and intensifying its focus on larger retailers instead of individual sellers. Recently, it launched Square for Retail, a mobile point-of-sale platform focused on the smaller and medium retailers. It is already seeing improved results from this focus. Within its seller mix, 43% of Square’s merchants process over $125,000 in annualized GPV compared with 34% a year ago. Besides generating more business, the larger retailers are also prone to demand more value-added services Square sells, such as invoicing, Instant Deposit and working capital.
Chart Consolidating in Bullish Triangle
Shares ran up fast heading into the May 3 earnings report and then continued higher after the company delivered beats on both top and bottom line—probably getting a bit extended with many of the other hot tech names.
But it has now had a healthy consolidation after the ‘tech wreck’ on June 9, holding support at the 20 dma along the $23.50 level. The triangle suggests a breakout to new highs could be coming.
Implied volatility for its options has moved towards the low end of its 52 week range.
- I’m buying a few calls outright.
- I’ll look for an exit on a 100% increase in the options value. Manage risk by exiting if shares close below $22.80 or options lose 50% of their value.
-Buy to open 3 contracts July Monthly 23 calls at $1.55 (do not go above $1.60)