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As Cash App users increase their income, Square buys more Bitcoin



This story has been updated to correct the number of Cash App users who bought and sold Bitcoin during 2020.

Square Inc. expanded its investment in Bitcoin with a $170 million cryptocurrency investment due to the surge in interest in transactions between Cash App customers, which more than doubled its revenue in the fourth quarter.

The company announced its latest Bitcoin investment on Tuesday and released its fourth-quarter earnings report, which showed that as interest in Bitcoin and stock trading increases, revenue continues to grow, and the user base of Cash App continues to increase.

Square stock SQ,
-4.29%
It fell 3.7% in after-hours trading on Tuesday.

Square’s monthly total number of Cash App users in December was 36 million. The company revealed that in January alone, more than 1

million Cash App customers bought Bitcoin for the first time, and throughout 2020, more than 3 million buyers bought and sold Bitcoin on the app.

The company announced in its report on Tuesday afternoon that its fourth-quarter revenue was US$3.16 billion, higher than the US$1.31 billion in the same period last year, and higher than the US$3.1 billion previously expected by analysts surveyed by FactSet, even though Wedbush analyst Moshe Katri gave MarketWatch ’S e-mail says “according to typical standards, [the] The net sales difference is relatively small. “More than half of the company’s total quarterly revenue comes from Bitcoin.

Square’s revenue this quarter includes $987 million from the seller’s business and $2.17 billion from Cash App, where Cash App can send users peer-to-peer payments as well as trade stocks and Bitcoin. In the quarter, Bitcoin revenue was $1.76 billion, while Cash App revenue excluding Bitcoin was $416 million. Since Bitcoin’s trading capacity still brings meager profits to Square, the overall gross profit growth of Cash App is small (162%) compared with Cash App revenue (502%).

The company said in its shareholder letter: “Bitcoin revenue and gross profit benefited from the increase in Bitcoin activity and customer demand, as well as the significant year-on-year increase in Bitcoin market prices.”

Square itself purchased approximately 3,318 bitcoins at a total price of approximately US$170 million. This was based on the previous purchase of bitcoins worth approximately US$50 million. Therefore, Bitcoin accounts for approximately Square cash, cash equivalents and 5% of total securities.

CFO Amrita Ahuja (Amrita Ahuja) stated in a conference call with reporters after the report was released that Bitcoin “has the potential to become the national currency of the Internet” and Square hopes to make our incentives compatible with cryptocurrencies. be consistent.

The most important point in Rosenblatt Securities analyst Sean Horgan’s report is Square’s disclosure that the overall customer acquisition cost of its Cash App in 2020 is less than $5 per user, which he said highlights the company’s “efficient marketing and viral network effects.” .

Square currently provides Cash App users with the ability to buy and sell Bitcoin and select stocks. Ahuja said this is in line with the company’s mission to educate investors to trade and make investments more accessible and relevant. She said: “When we consider investing in other cryptocurrencies on the platform” or other stocks, Square “will first be guided by the stability and security of our platform and the interests of customers.”

Don’t miss: MasterCard will allow merchants to directly accept some cryptocurrencies later this year

The payment company’s net income in the fourth quarter was $294 million, or 59 cents per share, while Square’s net income for the same period last year was $391 million, or 83 cents per share. After deducting stock compensation and other expenses, Square earns 32 cents per share, higher than the 23 cents per share in the same period last year, and higher than the FactSet consensus of 24 cents.

Square’s total payments (that is, the value of payments flowing through the company’s platform) increased to $32 billion from $28.6 billion a year ago.

The company made some comments on its January results, but declined to give a formal financial outlook. The company said in the shareholder letter that Square’s gross profit for sellers increased by 15% from the same period in January, “a slight improvement compared to the fourth quarter.” The company also saw “its Bitcoin, stockbrokers, and The highest monthly total of new active customers of cash card products”.

In the past three months, with the S&P 500 SPX, Square’s stock price has risen by 23%.
+ 0.13%
It has risen by 8%.


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