Square
Inside the Numbers
Square's results also revealed that crypto is becoming an increasingly essential part of Square's business as the company added 3,318 bitcoins to its balance sheet. Crypto trading continues to be a major source of growth and customer acquisition channel. Further, in public comments, CEO and founder Jack Dorsey has been outspoken in his belief that bitcoin is the "Internet's currency".
In Q4, Square reported earnings per share of $0.32 on total revenue of $3.2 billion which was a 141% increase. Analysts were looking for $0.24 per share and revenue of $3.1 billion in revenue. Gross profit increased by 52% to $804 million.
Covid has accelerated the adoption of digital wallets with the Cash app being one of the leaders in this segment. Currently, the service has 36 million active users which was a 50% increase from last year and a 20% increase from Q3.
The company didn't provide any guidance for 2021 given the uncertainties surrounding the pandemic. Square's small business customers have been devastated by the pandemic, however, this has been a boon for its consumer segment.
Stock Price Outlook
Square now has 5% of its balance sheet in bitcoin. In the near-term, this means that swings in crypto prices will likely be the biggest driver of its stock price. This will likely increase volatility but provide investors with good entry points.
The real way to think about Square is that these digital wallets are the future of banking. Cryptocurrency is simply a way to acquire customers at no cost. Additionally, economies reopening will be a huge boost for Square's small business customers which will see this part of the business return to a growth trajectory. Both businesses are dominant in expanding markets.
Therefore, investors should realize that the volatility of Square's stock is going to be amplified. However, the long-term promise of both of its units means that these swings will be opportunities to add exposure.
