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