Popular Stories

Square Beat Fourth-Quarter Estimates. The Stock Is Tumbling Because Growth May Be Slowing.

Courtesy Square

Square beat estimates for revenue and gross profits in the fourth quarter, but the shares were sliding in after-hours trading as the company indicated that first-quarter financial trends were only marginally better than the December quarter.

Square (ticker: SQ) reported gross revenue of $3.16 billion in the fourth quarter, ahead of estimates for $3.1 billion in sales. Gross profit came in at $804 million, beating forecasts for $798 million. The company reported $185 million in adjusted Ebitda (earnings before interest, taxes, depreciation, and amortization), well ahead of forecasts for $140 million.

Adjusted earnings came in at 32 cents a share, beating estimates for 24 cents.

But Square’s initial guidance on the first quarter wasn’t super-bullish. The company said gross profit in January was up 15% year over year, a “modest improvement” compared with the fourth quarter. Gross payment volume in its Seller division, providing payment services to businesses, was up 5% year over year in January, in line with the growth trend in the fourth quarter.

Square stock was down 5.2% in after-hours trading, at $243.20, after falling 4.3% in regular trading Tuesday.

Square appears to be tying its fortunes more closely to Bitcoin. The company said it bought 3,318 Bitcoins for $170 million in the quarter, on top of a $50 million purchase in the third quarter. Bitcoin now accounts for about 5% of Square’s total cash and equivalent securities. 

Bitcoin is fueling revenue for the firm’s popular Cash App, where users can buy and store the currency. Cash App generated about $1.8 billion of Bitcoin revenue and $41 million of gross profit in the quarter (the difference being the transaction and currency fees that Square makes as a broker). 

Square’s Bitcoin revenue was $4.6 billion in 2020, up ninefold year over year, and delivered gross profit of $97 million, or 2% of its total Bitcoin revenue, the company said. 

While Bitcoin isn’t a big moneymaker for Square, it may be driving adoption of its Cash App. The company said Cash App reached more than 36 million monthly active customers, up more than 50% year over year.

Square stock has surged 210% over the past 52 weeks and was up 18% this year, ahead of today’s earnings report. The company hosted a conference call to discuss the results at 5 p.m. Eastern time.

Write to Daren Fonda at [email protected]

View Article Origin Here

Related Articles

Back to top button