In Focus: Google and Square
We Lose Another One
R.I.P. to Google Plus. May its demise remind us all that imitation is not enough, purpose and direction are needed to succeed in life and in social media. Google Plus, say hello to Friendster and Myspace on the other side for us.
Google had great plans for Google Plus when it was released, but it always felt like a Facebook knock off, even one of their employees noted it in an email that went public. Swagger jacking Facebook wasn't enough to make Google Plus what Google hoped it would be. It never establish a clear purpose or direction.
If we analyze the most successful social media platforms they all have a thing, something that distinguished them from what was already out there.
Facebook, MySpace but with a dictator, you don't want colors and music, you want blue and white and uniformity.
Twitter, the microblog, just the headlines, follow your favorite celebrity and engage with them.
Pinterest, a digital garage sale with food but nothing was really for sale.
Instagram, Twitter for the illiterate, just look at the pictures.
Vine, looping video, promoting the rise of the digital age musician and comedian, the digital Star Search.
LinkedIn, use social media to climb the corporate ladder.
SnapChat, disappearing dick pics and camera filters.
But it Had Groups and Stuff
Google Plus seemed like it would be a success with its groups feature. A function where users could group their friends, their family, their co-workers, or their classmates all seperately. Allowing a user to post a funny picture from work in the co-worker group, and avoid the annoying questions from friends and family about the meaning of the photo. However, users just found Google Plus too complicated and/or couldn't get enough of their friends and family to leave Facebook.
Even with it shutting down I don't deem Google Plus a total failure. From Google Plus, Hangouts, Streams, and Photos where spun off. So maybe a social media failure, but a successful digital apps incubator?
We've stated in the past the our money is on Google to win the artificial intelligence/machine learning race. AI and ML is a software issue, and no one does software better than Google (minus Google Plus). The recent market sell off has put good companies on sale, Google is one of those companies. If you have a few thousand laying around and you're excited about AI and ML or you just want to hedge against the day computers and robots take your job, there's no better long term bet than Google's stock.
Google is a Buy.
Square's CFO left the company this week and she took the air out of the high flying stock with her. To be honest we only research companies with profits and Square has yet to make one. However, there is something here, but we haven't figured out if it's value or just well thought out speculation on our part.
With the introduction of Apple Pay and Google Pay we thought it was the end for Square, but the company was able to navigate that obstacles and investors rewarded them by accumulating shares.
The news of Sarah Friar's departure came on the same day The Dow Industrial Average sank 800 plus points. So it's hard to tell how much of Square's stock tanking was related to Friar's leaving and how much of it was related to the overall market.
Our theory is investors valued Sarah Friar's experience, and with her gone Jack Dorsey overseeing both Twitter and Square became much more difficult. We think running one publicly traded company is difficult and running two at the same time successfully is next to impossible.
We foresee Square continuing to sell off until a new CFO with Sarah Friar's level of experience and ability is named or until it hits its 200-day moving average. For a CEO running two publicly traded companies, the number two has to be strong. Square needs Kevin Durant, not JR Smith.
To Invest or Not to Invest?
Square is the new cash register company. Investors and investment media may give the company a sexy description, "digital payment processing platform," but it's just a cash register company, and there is nothing wrong with that, we actually love that. As long as people are opening businesses, there will always be a need for cash registers.
Technically speaking, if Square were to trade down to its 200-day moving average, (the blue line on the chart above) which is currently at $60.61 at the time of this writing, we would consider it a buy. At $60 per share that would put Square at a market cap of $18 billion. This generations cash register company for $18 billion isn't a bad deal. Revenue continues to increase and net income is headed in the right direction, from a big negative number to a smaller negative number. For now we have Square as a hold.
If you're looking for an artificial intelligence / machine learning investment, Google is the play, and it may be the safest play. If the company comes last in the AI/ML race - which we don't expect - what it currently has going for it is worth much more than the current stock price. Google is a buy.
Square, the cash register of the digital era has some issues. Finding a solid number two is priority number one. We have the company as a hold, but will consider it a buy around the 200-day moving average.
What the Cool Kids Read
Did you know our first issue of The Seville Report, which was released September 1, 2017 had a 26% return. Yup! One investment had a 9% return, another had a 22% return, and the big winner had a 62% return; and while we set targets to help out new investors, all three companies could be held well beyond the profit target, no fly by nights here.
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