🏦 Square: Banking Or Bitcoin ?
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🔥 Top Movers
🏦 Square: Banking Or Bitcoin ?
Square (SQ) recently released its in-house banking facilities, Square Financial Services, to its seller ecosystem, inching a step closer towards digital banking. (Tweet This)
Background: A side project by Twitter (TWTR) CEO Jack Dorsey in 2009 is now a $109B international fintech company. The company began with helping sellers to start, run and grow businesses by providing a plethora of financial and digital tools. Eventually, Square branched into providing digital banking services for sellers and customers, turning into a successful, cohesive commerce ecosystem. The company made eighteen acquisitions, raised $590M in funding, and went public in 2015, surging over 2000% since then.
Square's growth lies in rapid expansion and consistency in innovation supported by the recent adoption of cryptocurrency (purchasing $210M of Bitcoin). The company's most profitable offering is its Cash App, a mobile payments solution with over 36M users. Cash App's annualized gross profit per user is $41 opposed to a $5 acquisition cost, making it a strong rival to PayPal (PYPL) and Venmo, in the USA. Cash App also allows users to trade in stocks.
Like many companies that suffered in the pandemic, Square did take a few hits, too, as its commerce ecosystem relies heavily on traditional payment modes.
What Happened?: In its earnings report for Q4 2020, the company beat earnings estimates but slipped in revenues. The earnings were met with disappointment as most of the growth was fueled by Bitcoin rather than the core business. Regardless, the company has doubled down on integrating Bitcoin into its framework.
- Q4 Revenue $3.16B (141% YoY) Vs. Estimated $3.22B
- EPS £0.32 Vs. Estimated $0.24
- Gross profit $804M Vs. Estimated $798M
The company recently introduced Square Financial Services, an independently governed subsidiary of Square, headquartered in Salt Lake City, Utah. The primary purpose of this unit is to provide business loans and deposit products. Square Financial Services will eventually become the primary provider of financing for Square sellers, taking over from Square Capital (Square’s existing business loan provider). Banking and Bitcoin are both an interesting route taken by Square, helping its stock bounce back 500% from the March low in 2020. What will prevail may send ripples across the fintech ecosystem.
Market Reaction: SQ closed at $241.00 yesterday, up 4.77%; the shares are up 3.30% in pre-market trading.
Company Snapshot 📈
SQ $241.00 +10.97 (+4.77%)
Analyst Ratings 46 Analysts BUY 57% HOLD 35% SELL 9%
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