Stock Talk - Any Input or Ideas?
Thinking of making a small investment into two companies - Workday (WDAY) and Square (SQ), what do you all think of these two companies? Figured we can bounce around ideas in the comments section
bump
Give us your thesis. I mean if we are all going to get shitted on, it's only fair the OP goes first.
Lol, sure. I'm a non-finance major but I have really high hopes for SQ stock.
For one, just as a result of the gradual move to a cashless society, I feel like digital payment-processors are going to see massive growth in the coming years.
For two, Square's cash-app had a lot more downloads than PayPal's Venmo app, so the momentum is strong.
For three, Square recently released a business debit-card which will more than likely allow it to collect more revenue from businesses and entice other merchants to use the card.
For four, Square is thinking of actually becoming a bank (I believe they are in the works of having all the charters finalized, etc). I think - if they do become a bank and start providing loans to businesses - they will have an edge over most other banks, seeing as they have exact measures of all of their users payments/expenses and can more accurately assess credit-worthiness.
For five, SQ has a lot of room to grow - I read that less than 2% of all card transactions are processed through Square
As for Workday, lots of retail stores or even major companies would save a LOT of money by switching to digitized HR management software.
You're doing the right thing by looking at the trends in the industry, the TAM (total addressable market), and what the company is doing.
But there are a few more steps in approach you should consider: 1) What is implied by the market? I would say this is one of the most important things retail investors often miss. Just because you really like a company, use their products and it looks like they can only grow in sales/earnings etc, doesn't mean the stock price will grow. A company with 20% revenue growth can still fall in share price is the expectations were 30%. Without knowing too much about the company, I assume a lot of growth is implied in the current share price. So any drop in expectations would drop the price.
2) What's the valuation like? Is there any support from the asset base? Clearly SQ is all about growth, so likely will be more volatile than the market as a whole.
3) How much cash are they making, how much debt do they have. As a young tech firm, I assume debt is fine. But are they cash flow negative or positive? Because if FCF is negative, they may need to raise money if things don't go their way.
4) How expensive are they compared to other similar companies? Eg. paypal, worldpay, adyen. If SQ trades on higher multiples, it is just hype or some fundamental reason?
5) Other things that may impact the stock going forward, eg. who is in management/board - are they capable, entrenched? Any hedge funds, esp activists that are major shareholders?
Ultimately, investing is a probability game. Be prepared to lose money a lot of times. You have to be right more than 50% of time and be right by more than you are wrong. That's why you would invest in a portfolio of assets.
I like SQ for all the reasons you mention, but it's definitely a longer play. Payments are such a commodity that its a race to the bottom in fees unless you have a compelling reason for your customers to stay. Without some major changes they are never going to break into the real treasury business and will be reliant on Mom & Pop retail for their revenue.
As for WDAY, I like it in the short term, but in my experience it is used by default not by choice. A strong competitor with better UI/UX for end users should make things interesting.
Do you think $200 within the next 5 years is unrealistic for SQ?
With SQ moving into the banking space, and maybe even the investment space (they already have a bitcoin platform, so maybe offering stocks?), I think it's possible.
Anything is possible. I do like that they are working on diversifying their revenue stream.
Holding the cash of their customers is a shrewd move.
I hear VTSAX is a solid buy...
A pharmaceutical company, Farrow Tech has a drug called Parattin in the third stage of FDA approval. I also have a bullet on it. A couple of days ago Dan Dorfman, on CNBC, put a heavy buy recommendation on Farrow Tech. Reason being, he's been in contact with the CEO of the company and they feel FDA approval will happen in the next three or four weeks.
Have you bought some shares of that stock?
I like how he's username is "Pump and Dump"
Sounds like a sure thing. Can I get 2,000 shares? I hear that's the limit for new accounts.
$SQ is one of my favorite long-term holds. Doing the most for advancing US fintech.
I will say though, SQ has a tremendously high variance and has already pumped so much in the past 2 years. It depends more on what SPX and the tech sector does at this point in my opinion.
disclaimer: I am short some US tech sector
Do you think it's a good idea to get in on SQ at its current price?
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