Block Inc (SQ)

(A Top Pick Apr 17/19, Down 7%) The competition is with the likes of SHOP. They will report earnings tonight. They also provide financing along with collecting transaction fees, where margins are 40%. Ongoing fees have margins of 80%. In the long term, the opportunity remains. He still likes them. His target is $79.

Their software lets retailers take payments, manager inventory and now for consumers a cash app including peer-to-peer transfers. SQ is pricey, but boasts 25% revenue growth--doing well in developing software. Trades at 14x current revenue. If they can execute on their cash app, SQ can move higher. But he prefers Mastercard in the US payments space.

LSPD-T vs. SHOP-T vs. SQ-N. He owned SHOP-T and then sold it and it was a mistake. None of the three companies meet his criteria. They have rapidly growing top line but the bottom line is not where it should be. LSPD-T bought another company recently and the stock price reacted favorably. We don't know enough about their bottom lines to be comfortable with them. These are fairly aggressive positions, especially at these levels. These would not be large allocations but if you wanted a little punt and accepted the volatility then these would probably be okay. SHOP-T would be the leader of the three.

Rangebound? It is not a name he would own. It hit over $100 at one point, but is trading at too large of a multiple for his liking. They have a cash app that allows for an instant transfer of funds between people that he likes. However, there are still transaction costs that give Visa and Mastercard the advantage.

Has yet to make any money. They are a disruptor. We're inching toward an era where there will be pressure on the likes of Visa. But Square has a very high built-in premium assuming success. So he sold Visa, but wouldn't buy Square until things settle down.

At 60-70 times earnings, this is not a great investment. He would step away. He likes the company, but now is not the time to buy. Stay away look at Visa or Mastercard.

High beta. He's traded it before. Sideways move during last year, and so is the 200-day moving average. Prefers the larger names in this space like Visa, Mastercard. Square focuses on the small merchants, who are more sensitive to the macro economic environment, especially at this stage of the cycle.

He owns this and took a little profit back in July. He sees them as a disruptor against Visa, PayPal and the like. His price target is $82. (Analysts’ price target is $80.00)