Please ensure Javascript is enabled for purposes of website accessibility

Investors Shouldn't Discount Square's International Aspirations

By Brian Withers and Brian Stoffel - May 12, 2021 at 6:46AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's a big world out there.

As successful as Square (SQ -5.09%) has been, investors may think this brand is well known globally. But that's not the case. With only a single-digit revenue share outside of the U.S., its seller's software and cash app businesses are just getting started. On a Fool Live episode recorded on April 28, Fool contributors Brian Stoffel and Brian Withers discuss the company's latest international moves and why it can ultimately be successful in the markets it enters.

Brian Withers: I'm going to cover Square, SQ. Earlier, Square didn't have earnings yet. Their next results are first of week of May. But they announced that they are going to be opening up to sellers in Ireland for an early access program, which is really just a little bit of the early phases of its international expansion. They said that merchants who enroll in this program can get started with Square's products in just a few days with no long-term contracts or start-up fees and qualify for free Square hardware. It expects to launch its products for general availability in Ireland later in 2021.

This announcement really made me look at how much of Square's revenue actually comes from the U.S. Last fiscal year, excluding Bitcoin sales, international revenue was $311 million, or just 6 percent of the total. The company has operations in Canada, Japan, Australia, the United States, and soon to be Ireland. It currently has a $100 billion on the seller side and $60 billion on the cash app side in addressable market. But most of that is in the U.S. It's well underpenetrated in its current addressable market less than about 3%. I'm going to watch this continued globalization and see how they rebound with the seller segment as the economy picks back up.

Brian Stoffel: Square has always been one that I feel like I just missed. In fact I'm pretty sure Brian pitched it to me when we met in person, Brian Feroldi, the last time we were all in D.C. But when we're looking internationally, I'm wondering what makes you think that Square can meet success? There is already some big multinational companies that have options out there, but there's also homegrown ones. What's going to drive Square's success internationally?

Withers: I think just its success domestically and the fact that it's had 12 years to build a solid set of products, is really going to help. It's already competing against familiar names like Shopify and Wix here domestically and probably a lot of smaller players too. Its seller's platform is actually made up of 30 distinct hardware, software, and financial services products. Last year, its sellers in just the regions that it's in drove a $112 billion in gross payment volume. That was up 12% year over year. Its sellers wouldn't be generating that kind of volume [of sales] through the platform if the platform was mediocre. On the cash app side, the company is not above doing acquisitions. It purchased Verse as a P2P [person to person] payments segment. That's a company out of Spain that works across Europe. But it's got three billion in cash and cash equivalents on the balance sheet and I look for it to continue to invest in growth both domestically and internationally.

Brian Stoffel has no position in any of the stocks mentioned. Brian Withers owns shares of Square. The Motley Fool owns shares of and recommends Shopify, Square, and The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Block, Inc. Stock Quote
Block, Inc.
$75.66 (-5.09%) $-4.06 Stock Quote
$70.02 (-3.86%) $-2.81
Shopify Inc. Stock Quote
Shopify Inc.
$45.77 (-4.11%) $-1.96
Bitcoin Stock Quote
$21,369.01 (-9.02%) $-2,118.26

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.