I took advantage of the recent rally to sell my $SQ shares. I must admit that I bought in at much higher prices without much research. After holding for some time and a few quarterly earnings later, I figured that the management execution is not up to my expectations and the business have no real strong moats. Here are some of the reasons that made me decide to take the loss:
- There's too much competition in the FinTech space that no single player can dominate.
- Path to profitability is unclear, business model lacks scalability.
- Poor acquisition actions. Buying TIDAL that doesn't really add synergy to the core business. Paid a sky-high valuation for AFTERPAY in the form of stock, resulting in huge share dilution. Revenue addition from Afterpay is not impressive either.
- Invest in speculative assets and businesses (Bitcoin) when main business isn't profitable yet.
- Valuation is still arguably expensive even after the recent plunge. Growth rates have slowed, and there's no clear plan to accelerate it. Uncertain if the current business model has any operating leverage.
Basically that's it. Lost my conviction to hold. They might get hit further if we go into a deep recession since a lot of their customers are SMEs.
So, for those of you that are shareholders of the company, what makes you continue to hold onto your shares or even buy more at these prices? Is there something about this business I missed that could potentially make it a multibagger investment in the future?
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