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It seems like every week we are seeing a major private company hit the public markets, and the Stripe IPO could be the biggest of them all.
This is no surprise as private firms take advantage of one of the best public market conditions of all time. Driven by the U.S. Federal Reserve, stimulus checks, and record low interest rates, stocks are getting a generational boost. Some of these high-profile IPOs include AirBnB Inc. (NASDAQ: ABNB), DoorDash Inc. (NYSE: DASH), Roblox Corp. (NYSE: RBLX), and Lucid Motors (NYSE: CCIV), an up-and-coming competitor to Tesla Inc. (NASDAQ: TSLA).
Despite the plethora of companies going public through the standard IPO process, direct listing, or SPAC merger, one behind-the-scenes private company is now worth almost $100 billion and at the forefront of the trends of digitization.
I'm talking about Stripe, a software as a service (SaaS) company offering payment processing software for e-commerce websites and mobile applications. It just raised $600 million at a valuation of $95 billion, making it the world's second most valuable venture-backed company behind China's ByteDance, the creators of TikTok.
It has almost quadrupled its valuation from early 2019, when it raised $100 million from Tiger Global at a $22.5 billion valuation. The trends toward cashless payments and e-commerce started long before the pandemic, and it has only been accelerated into an unstoppable trend.
Many people have no interest in using cash anymore, and the percentage of spend on e-commerce retail sales grew 44% last year. You can buy anything online these days from your groceries to even a car through Carvana Co. (NYSE: CVNA) or house on Redfin Corp. (NASDAQ: RDFN).
Unfortunately, with this last capital raise, a Stripe IPO could be far away.
But the trend that's making Stripe such an attractive company is already here. And you have the chance to profit from it right now without waiting for Stripe's IPO date...
Why Square Is the Right Stock to Buy
That is why you should think about putting your money in Square Inc. (NYSE: SQ), one of the top publicly traded fintech companies in the world. It's also very similarly valued to Stripe at a market cap of $110b.
Right now, Square is firing on all cylinders and riding the digitization wave.
Not only that, but its moves into crypto years ago are really starting to pay off with the price of Bitcoin skyrocketing to over double the previous highs in 2019 and growing over 1,000% since March 2020 lows. It even keeps Bitcoin on the balance sheet and has made over $200 million in Bitcoin purchases over the last year.
Square has an incredible value proposition, and between its crypto offerings, Cash app, debit card, and many other services, its average revenue per customer is around $30. Its closest competitor, PayPal Holdings Inc.'s (NASDAQ: PYPL) Venmo, is only at $13. While this gap will eventually get closer, Square continues to innovate and offers services we may likely never see with Venmo, such as stock trading.
All of this has helped it to grow revenue over 100% since last year, the fastest growth it has seen since 2013. That is an incredible rate of growth and revenue per customer and just shows how powerful the Square ecosystem is.
But this isn't just a boost from pandemic-forced online shopping. Square is also one of my top reopening plays given its significant presence with in-person payments.
While it has grown its omnichannel and online business 3x from four years ago, the majority of its business is still in-person only. Square has simplified payments for in-person transactions and could see a jump in business as the economy opens back up. On top of that, we have also seen that in-person businesses that have adopted Square since 2015 have seen their cash transactions drop from over 50% down to under 30% showing increased utilization rates.
With the stock still down over 10% from its highs, it could be a good time to get into the name at a discounted price and ride the wave of digitization and the reopening of the economy.
You could be booking gains before the Stripe IPO ever gets off the ground.
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About the Author
Alex Kagin is the Director of Technology Investing Research at Money Map Press. He has spent the last decade working in equity research, most recently with Energy Capital Research Group (ECRG), where he led technology stock research along with working as part of a team developing a customizable financial data platform for securities analysis.
Prior to joining ECRG, Alex spent 8 years at DeMatteo Research, a boutique primary research firm and broker-dealer servicing the institutional investment community. He managed the Tech, Media, and Telecom vertical where he spent time connecting with hundreds of tech executives and hedge funds to get the pulse of the market.
Alex has a B.S. in Economics from American University and previously held Series 7 and 63 security licenses.