[fraserharris]

Your analysis is incorrect because you are basing it on Price/Earnings, whereas the market is pricing Square on Price/Earnings Growth. Square is replacing hundreds of incumbent POS vendors & is growing quickly. Airlines, oil companies, etc aren't generally growing that quickly.

[mbesto]

Exactly. This is the precedence that has been set:

http://www.wikinvest.com/stock/Facebook_(FB)/Data/EBITDA

http://www.wikinvest.com/stock/Google_(GOOG)/Data/EBITDA

http://www.wikinvest.com/stock/Apple_(AAPL)/Data/EBITDA

http://www.wikinvest.com/stock/Tweeter_Home_Entertainment_Gr...

[bane]

Max earnings growth is almost impossible to predict with any kind of accuracy. The analysis is basically # of PoS on the planet * avg. current earnings per PoS and that becomes some mythological possible upper bound, or some other nonsensical analysis. Even if they're doubling earnings every year, exponential growth never lasts, yet valuations will reflect some kind of continuous exponential growth into infinity.

The point is, even if Square hit some kind of real P/E that made them a $6bil company, they wouldn't be doing anything nearly as impressive or substantial as actual companies who are today worth $6bil.

[untog]

Square is replacing hundreds of incumbent POS vendors & is growing quickly

Is it, though? I haven't seen many new POS terminals in a long time.

[ben1040]

As in, you haven't seen old POS terminals replaced with new ones?

At least in the US, you're going to see lots of this happening in the next year. Starting October 2015, the major card brands have dictated that merchants will be liable for fraudulent transactions processed via the magstripe (as opposed to EMV).

That means lots and lots of new terminals. Square's also got an EMV compliant reader coming out soon.

[objclxt]

> Square's also got an EMV compliant reader coming out soon.

Chip and signature though, not chip and PIN. I can't see anything from square about the liability for chip and signature, but it's normally on the merchant, not the bank.

[untog]

I mean Square ones specifically.