Blind Faith Price Targets

[jhm]

Sure I can try that out. Is this a 2025 target?

Tell us what you see in SQ. I've looked at a bit, but don't get what makes it compelling. It's possible that my vantage point as someone who works in banking makes it hard for me to see what is disruptive. I respect that people in incumbent industries often are the last to understand disruption.

Wow my reading is not so good. Yes, 2025.

 

[hershey101]

Wow my reading is not so good. Yes, 2025.

Yep, here's the blog post by ARK invest (with a link to their analysis spreadsheet on github). They value $SQ at $375 in 2025 which is ~$182B (post dilution). I simply rounded it up to $200B after playing around with some of their #s and also taking into consideration what @DaveT was talking about back in June when I first started looking at the company.


I think that they offer a significantly different product from traditional banks with CashApp, though I'd admit that their moat is not nearly as strong as $TSLA imo. The #s speak for themselves though with CashApp quickly gaining market share relative to PayPal, Zellie, and others.

I think the fact that ARK's valuation is based solely on US market penetration leaves a lot of headroom for growth in 2025-2030. This is basically a network-effects play within the fintech sector much as FB would have been in it's early days vs. Google Hangouts, or MySpace or others.

 

[jhm]

Yep, here's the blog post by ARK invest (with a link to their analysis spreadsheet on github). They value $SQ at $375 in 2025 which is ~$182B (post dilution). I simply rounded it up to $200B after playing around with some of their #s and also taking into consideration what @DaveT was talking about back in June when I first started looking at the company.


I think that they offer a significantly different product from traditional banks with CashApp, though I'd admit that their moat is not nearly as strong as $TSLA imo. The #s speak for themselves though with CashApp quickly gaining market share relative to PayPal, Zellie, and others.

I think the fact that ARK's valuation is based solely on US market penetration leaves a lot of headroom for growth in 2025-2030. This is basically a network-effects play within the fintech sector much as FB would have been in it's early days vs. Google Hangouts, or MySpace or others.

This price target $375 or even $539 (= $200B / 371.3M shares) is too small to fit with past historical growth. A market cap around $600B to $800B is more consistent with historical growth. Of course, it is quite reasonable to expect growth rates to slow as a company reaches scale. In terms of BFPT methodology, this means the distribution of implied discounts trends downward over time. Sentiment is not so helpful for gauging trading opportunities; that is, sentiment does not back test so well. However, ID does back test well. So it may be the more useful guide.

Based on this back test, it seems good to buy SQ whenever the Implied Discount is above. Thus, a price near or bellow $120 looks promising for positive one-year return. Of course, the stock has such strong long-term growth potential, it might not matter so much what prices one pays.

So here are the targets based on $539 by end of 2025.

$200B MktCap LTPT $539​	Lookback 48 months​
Percentile​	Implied Discount​	2020-10-01​	2020-12-31​	2021-10-01​	2021-12-31​	2022-12-31​	2023-12-31​	2024-12-31​
99.9%​	24.8%​	$168​	$178​	$210​	$222​	$277​	$346​	$432​
2%​	52.2%​	$59​	$66​	$90​	$100​	$153​	$232​	$354​
10%​	49.4%​	$65​	$72​	$98​	$108​	$161​	$241​	$361​
20%​	44.8%​	$77​	$84​	$112​	$122​	$177​	$257​	$372​
30%​	42.5%​	$84​	$92​	$119​	$130​	$186​	$265​	$378​
50%​	38.7%​	$97​	$105​	$134​	$145​	$202​	$280​	$388​
70%​	34.9%​	$112​	$121​	$151​	$163​	$219​	$296​	$399​
80%​	33.4%​	$119​	$128​	$158​	$170​	$227​	$303​	$404​
90%​	31.2%​	$130​	$139​	$170​	$182​	$239​	$313​	$411​
98%​	26.6%​	$156​	$165​	$197​	$209​	$265​	$336​	$425​

 

[jhm]

I think the fact that ARK's valuation is based solely on US market penetration leaves a lot of headroom for growth in 2025-2030. This is basically a network-effects play within the fintech sector much as FB would have been in it's early days vs. Google Hangouts, or MySpace or others.

Specifically, I think international prospect are really import for fintect. Specifically, in countries were remittances are costly to send, there are huge opportunities for new technologies to reduce transaction cost. For example, a US immigrant from DR Congo can spend $35 or more to send $400 to family in Congo. Large global banks only have direct banking services in a tiny fraction of countries, think G8. They will have correspondent banking relationships to connect with another 30 to 60 countries. That leaves countries like DRC out cold from the global banking system, and that is why remittance fee are so high. I would also add that government corruption is also a contributing factor to making the country virtually "unbankable."

Square is including transaction services in BitCoin. I believe this has the potential to crack the remittance market. It would be best if they had operations both in US and countries like DRC. It's not absolutely necessary, but exchanging BitCoin for local USD (the remittance currency) also exposes recipients to transaction costs. A real end-to-end solution for remittances would be ideal. Companies like Western Union have "cash carts" in DRC. Small vendors pushing small carts process remittances for clients and deliver USD cash in hand. (Try to imagine the physical risks of such an operation.) Almost no one has an actual bank account in DRC. Cell phone companies have pioneered setting up digital currencies to facilitate payments via smart phones. Basically, the whole country is unbankable. If Square or any other FinTech can find clever ways to solve these problems, the global business could be very powerful.

 

[hershey101]

Based on this back test, it seems good to buy SQ whenever the Implied Discount is above. Thus, a price near or bellow $120 looks promising for positive one-year return. Of course, the stock has such strong long-term growth potential, it might not matter so much what prices one pays.

So here are the targets based on $539 by end of 2025.

Interesting... What does the implied discount for 2018/2019 look like?

One thing that Cathy said, which I found interesting, in last week's commentary is essentially that disuptive tech (Eg. $SQ) have reached escape velocity, and may continue to grow like crazy (regardless of dems vs. republicans)

 

[SebastianR]

bump - in light of the current price action ;-)