Growing volumes at a near-30% CAGR from 2015-2021 to an impressive ~ $200 billion, Square has been the crown jewel of the modern U.S. POS industry for many years.
Although Cash App has become a more dominant part of SQ's story, the Seller and POS business (now dubbed 'Square') still accounts for 45% of the total company gross profit.
Plus, the Seller and POS business is even more critical to the story amid rising concerns regarding the quality of Cash App's revenue sources (~45% of company GP).
For instance, Dolev did not like Cash App's increasing reliance on payday lending ('Cash App Borrow') and reminded investors of the looming threat to its lavish 175bps Instant Deposit take rate (estimated ID = 15-20% of company GP) from the soon-to-arrive FedNow real-time payments system in the U.S.
Over the last few years, the POS business has been a beacon of stability for Square.
However, increasing competitive pressures from next-gen POS systems and lack of vertical-specific expertise like Toast, Inc (NYSE: TOST) has in restaurants, which account for nearly one-third of SQ's GPV, began to take their toll.
Assessing web traffic data for Square versus competitors like TOST and Clover showed challenged interest in Square.
In the grand scheme of U.S. merchant acquiring, Square remains a share gainer versus legacy participants like Fidelity National Information Services, Inc (NYSE: FIS) and Heartland and Global Payments Inc (NYSE: GPN). However, momentum is slowing relative to next-gen competitors such as TOST and Clover.
Volume comparison versus TOST and Clover and Fiserv, Inc (NASDAQ: FISV) shows relative share loss.
TOST's restaurant survey flagged SQ as the most significant share donor to TOST.
Wells Fargo analyst Jeff Cantwell maintained Block with an Overweight and lowered the price target from $97 to $96.
Price Action: TOST shares traded higher by 1.01% at $69.59 on the last check Monday.
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