Square Buys More Bitcoin As Cash App Users Increase Income

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This story has been updated to correct the number of Cash app users who bought or sold bitcoin in 2020.

Square Inc. doubled down on bitcoin with a $ 170 million investment in cryptocurrency, as growing interest in trading among Cash App customers allowed revenue to more than double in the fourth quarter.

The company announced its latest bitcoin investment on Tuesday in conjunction with its fourth quarter earnings report, which showed growing revenue and a growing user base of the Cash app with a growing interest in bitcoin trading and actions.
Square partage SQ,
-4,29%
were down 3.7% Tuesday after-hours trading.

Square had 36 million monthly Cash app users in December. The company revealed that more than 1 million Cash app customers bought bitcoin for the first time in January alone, while more than 3 million bought or sold bitcoin on the app for the whole of 2020.

The company posted fourth-quarter revenue of $ 3.16 billion in its Tuesday afternoon report, down from $ 1.31 billion a year earlier and ahead of the $ 3.10 billion expected by analysts polled by FactSet, although Wedbush analyst Moshe Katri said in an email to MarketWatch. that “according to typical standards, [the] Net sales were relatively low. More than half of the company’s total quarterly revenue came from bitcoin.

Square’s revenue for the quarter included $ 987 million from its seller activity and $ 2.17 billion from the Cash app, where users can send peer-to-peer payments as well as stocks and bitcoin. Bitcoin’s revenue was $ 1.76 billion, while non-bitcoin Cash app revenue was $ 416 million in the quarter. Since Bitcoin trading capabilities still have a low margin for Square, the overall gross profit of the Cash app has increased by a smaller percentage (162%) compared to the revenue of the Cash app (502%) .

“Bitcoin’s revenue and gross margin benefited from an increase in Bitcoin assets and growth in customer demand, as well as a significant year-over-year increase in the market price of bitcoin.” , the company said in its letter to shareholders.

Square itself has bought around 3,318 bitcoin at a total price of around $ 170 million, building on a previous purchase of around $ 50 million of bitcoin and making bitcoin around 5%. of Square’s total cash, cash equivalents and marketable securities.

Bitcoin “has the potential to be the native currency of the Internet” and Square wants to “align our incentives” with cryptocurrency, CFO Amrita Ahuja said on a call with reporters following the report.

A highlight of the report for Rosenblatt Securities analyst Sean Horgan was Square’s disclosure that its overall customer acquisition costs for the Cash app were less than $ 5 per user in 2020, which, according to him, highlighted “the effects of effective marketing and viral network of the company”.

Square currently offers Cash App users the ability to buy and sell bitcoin as well as a select group of stocks, which Ahuja said was aligned with the company’s mission to educate investors on the trading and make investing more accessible and accessible. “While we think of other cryptocurrencies” or other equity investments on the platform, Square “will be driven above all by the stability and security of our platform” as well as the interest of customers, she declared.

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The payments company posted fourth-quarter net income of $ 294 million, or 59 cents per share, while Square reported net income of $ 391 million, or 83 cents per share, a year earlier. After adjusting for stock-based compensation and other expenses, Square gained 32 cents per share, down from 23 cents per share a year earlier and above the FactSet consensus of 24 cents.

Square’s gross payment volume, or the value of payments passing through the company’s platform, rose to $ 32 billion, from $ 28.6 billion a year earlier.

The company offered some comments on its January performance, but declined to give a formal financial outlook. Square’s sellers’ gross profit rose 15% from a year ago in January, the company said in its letter to shareholders, “a modest improvement from the fourth quarter.” The company also recorded its “highest monthly totals of new active customers trading for its Bitcoin, Stock Brokerage and Cash Card products” in January.

Square shares have gained 23% over the past three months as the S&P 500 SPX,
+ 0,13%
increased by 8%.


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