Square Makes More Sense for Morgan Stanley

Square Makes More Sense for Morgan Stanley

It is difficult to get excited about Morgan Stanley’s recently announced acquisition of ETrade. The latter is essentially a no growth business (P&L below), competing in a cut-throat market. On the other hand, Square – albeit a larger company that would command a larger price – is a FinTech leader in growing consumer markets.

If Morgan Stanley (tkr: MS) wanted to pursue consumer assets, why not move to acquire Square (tkr: SQ)?

  • Square enjoys double-digit revenue and operating cash flow growth.
  • Square is a leader in the rapidly growing peer-to-peer payments market.
  • Square would provide Morgan Stanley with a digital currency play (Bitcoin is approximately 10% of SQ’s revenue).
  • Users can trade stocks from their Square account.

ETrade’s P&L

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