SQUARE, INC. HAS ANNOUNCED THE CHANGE OF ITS NAME TO BLOCK
SQUARE, INC. HAS ANNOUNCED THE CHANGE OF ITS NAME TO BLOCK
On December 1, Square Inc, one of the largest mobile payments companies in the United States and the world, announced the change of its name to Block. According to the statement released by the company owned by Jack Dorsey, the name change is the need to differentiate the parent company from the trademarks associated with the business. So far, Square has been the name of the legal entity and the various companies (brands) belonging to it. In the future, Square will continue to be the name of the mobile payments platform - understood as the brand - while Block will be the name of the company that owns the brand. In addition, over the years, Square has acquired new brands - TIDAL, CashApp, among others - which has further driven the need to differentiate the parent company's brands.
A LOOK AT ONE OF THE FASTEST-GROWING COMPANIES OVER THE LAST FEW YEARS IN THE UNITED STATES.
In 2009, entrepreneurs Jack Dorsey and Jim McKelvey created Square Inc. (SQ by its New York Stock Exchange ticker), fulfilling a dream of creating a technology capable of aggregating mobile commerce and payment services into a single easy-to-use service. Less than a decade later, Square has grown from a small business to a billion-dollar company that is used to accept credit card payments, track sales and inventory, and obtain financing.
Square's product line includes the Cash App, which allows users to send and receive money, without fees, through a mobile app, and Square Point-of-Sale, a free app that will enable merchants to process payments via smartphone.
HOW SQUARE HAS GROWN IN FINANCIAL RESULTS OVER THE LAST DECADE
Square received seven private funding rounds before listing as a public company in November 2015. The company's most prominent investors include Acequia Capital, Sequoia Capital, and Khosla Partners. On November 19, 2015, Square's stock began trading on the New York Stock Exchange for $9 per share, giving the company a valuation of $3 billion. By April 15, 2021, Square shares were trading at $265 a unit.
In November 2017, the Cash App announced a test program to make bitcoin trading available to specific users. Then, in March 2018, the company extended bitcoin trading as a service to the state of Wyoming, pushing Square's stock price to its highest price ever.
On April 6, 2018, Square announced the acquisition of a California giant, San Francisco-based company Weebly, a website building and hosting service for websites. In August 2014, Square acquired meal delivery service Caviar. The company became the first company to have both a point-of-sale service and a food delivery company after launching Square's service for restaurants in May 2018. Caviar would later be sold to DoorDash in 2019 for $410 million.
WHAT PRODUCTS AND SERVICES DO SQUARE OFFER?
Square charges merchants 2.60% of sales plus 10 cents on each transaction they process and charges 3.5% plus 15 cents for each manual keyed transaction. In addition, Square's Point of Sale allows customers to pay, tip, or sign up for merchant services via phone or tablet and allows merchants to process payments made with credit cards, debit cards, gift cards, and cash.
Business owners can also use the application to send and track invoices, customize products, email invoices, apply discounts, manage cashback, access real-time sales data, and track inventory on the fly.
Square Point of Sale is typically used in conjunction with the Square Reader, a small device installed next to a mobile phone or tablet that reads credit and debit cards. Users can access information and start using the point of sale applications by logging into the application's desktop. Money from merchants' transactions is typically deposited into their bank accounts within two business days. Other Square products include Square Analytics, a set of free tools that can be applied alongside Point of Sale products. The company also offers Square Appointments, an online service that allows users to schedule meetings.
Square Stand, one of the company's few physical services, allows users to turn their iPad into a full-fledged point of sale. The company has also expanded into the small business financial services sector with products like Square Capital, which provides cash advances for merchants without subjecting them to mandatory payments at fixed periods. In addition, the firm now offers complete payroll services in all 50 states with its Square Payroll tool.
WHERE IS SQUARE TODAY?
At this review, Square shares were trading at 181.31 per unit on the New York Stock Exchange. That gives the company a market capitalization of over $112 billion. To reach the trillion-dollar level, the capitalization has to be multiplied by eight, which means the company has to double in value three times. This means an average growth of about 26% over nine years.
So far, Square's growth has significantly exceeded that rate. Since its initial public offering in 2015, its value has increased by 1,800% in less than six full years, including an increase in company value of 105% over the past year. However, in 2021, Square's stock only rose by just 13%.
The company's current valuation could explain the slow growth we've seen over the past year. The share price has its P/E ratio at 350, representing a massive climb from the P/E ratio of 75 in March 2020. This ratio has also increased over PayPal's, which is just 70.
SQUARE'S COMPETITIVE ADVANTAGE
However, the potential of its ecosystem points to earnings that could push the company's valuation to $1 trillion or beyond by 2030. Moreover, while Stripe and Paypal are making inroads into Square, Square still offers a level of consolidation not previously seen in the financial industry.
Banks have been offering payment services for years. However, Square has built potential in this area by adding business functionality. For example, businesses had to buy unique systems to manage their payroll in the past. Today, Square offers these services for even the smallest companies. However, now that Square has launched its bank, businesses can handle all their needs within Square's system.
Square has also helped revolutionize personal finance with its Cash App. Thanks to its ability to handle transactions, buy and sell stocks, and trade cryptocurrencies, the Cash App can manage most private banking functions. Additionally, Square's foray into banking services could take consumer banking a step further, posing a severe threat to traditional commercial banking.
What's more, Square only operates in six developed countries, even counting its recent opening in Ireland. Given that Ireland is the first country Square has ventured into that uses the euro, this could point to a significant move into the European economic zone very soon. This leaves the company with tremendous expansion potential, more effective than Paypal, which already operates in 200 countries.
CAN SQUARE FINALLY REACH A MARKET VALUATION OF ONE TRILLION DOLLARS BY 2030?
Anything can happen over the next few years. However, Square has significantly exceeded its required rate of 26% in non-pandemic years, indicating that it could indeed reach a market cap of $1 trillion by 2030. Nonetheless, the ecosystem has developed for almost all things finance that could attract new users. This is especially true internationally, as the company has not expanded into the European Union and beyond. So while the company's earnings have already grown significantly and the valuation could see slower growth over the next few years, the growth outlook for the long term is that indeed the company could reach a market valuation by 2030, or even sooner.