Square also refunded all its Seller subscription fees in March to help merchants cope with the crisis, which temporarily throttled its growth in Seller service revenue, and paused new core flex loan offers at its financing arm Square Capital. Square's business fared well in the first quarter, which ended on March 31, but the second quarter could be tough as the company bears the full impact of the COVID crisis.
Ahuja claims the "trend line stabilized at these levels" and the company has seen "improving growth rates since mid-April. Ahuja notes four tailwinds are stabilizing the business: existing sellers using more omnichannel solutions, new sellers shifting to digital payments during the crisis, a sales boost during Easter, and stimulus checks and loans. Square is also offering more delivery, curbside pickup, and contact-less transaction tools to help merchants remain open during the pandemic.
Ahuja's comments are encouraging, but potential challenges still loom on the horizon. And the softness of certain sectors -- like food, beverage, and retail -- could still overwhelm stronger verticals like home, repair, and professional services. Square's stock isn't cheap at more than times next year's non-GAAP earnings forecast. PayPal, which is growing at a slower clip but consistently profitable on a GAAP basis, trades at just over 40 times forward earnings.
Square's stock trades like the storm has already passed, but the company merely stated its business was stabilizing instead of fully recovering. I own shares of Square and believe it's still a great long-term investment, but we could just be passing the eye of the storm before the headwinds accelerate again. May 11, at AM. Author Bio Leo is a tech and consumer goods specialist who has covered the crossroads of Wall Street and Silicon Valley since Motley Fool Staff Sep 23, Square's Earnings: Disappointment or Buying Opportunity?
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