This story has been updated to correct the number of Cash app users who have bought or sold bitcoins during 2020.
Square Inc. doubled in bitcoins with a $ 170 million investment in cryptocurrency, as growing interest in trading among Cash App customers contributed more than double in revenue in the fourth quarter.
The company on Tuesday announced its new investment in bitcoins in conjunction with its fourth-quarter earnings report, which showed growing revenue and a growing base of Cash App users amid growing interest in both bitcoin trading and the equity.
Square shares SQ,
they fell 3.7% in trading outside of Tuesday hours.
Square had 36 million monthly Cash App users in December. The company revealed that more than a 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 throughout 2020.
The company posted fourth-quarter revenue of $ 3.166 billion in its report Tuesday afternoon, up from $ 1.330 billion a year earlier and above the $ 3.10 billion expected by analysts surveyed by FactSet, though Wedbush analyst Moshe Katri said in an email to MarketWatch that “by typical standards, [the] the pace of net sales was relatively small. ”More than half of the company’s quarterly revenue came from Bitcoin.
Square’s revenue for the quarter included $ 987 million from the selling business and $ 2.17 billion from the Cash app, which is where users can send peer payments as well as trading stocks and bitcoins. Bitcoin revenue reached $ 1.76 million, while Cash app revenue, excluding Bitcoin, was equivalent to $ 416 million in the quarter. As bitcoin trading capabilities continue to have little margin for Square, the overall gross profit of the Cash app increased by a smaller percentage (162%) compared to the Cash app revenue (502%) .
“Bitcoin’s gross revenue and profits benefited from an increase in Bitcoin assets and growing customer demand, as well as a significant year-over-year increase in the Bitcoin market price,” the company in its shareholder letter.
Square itself bought about 3,318 bitcoins at an aggregate price of about $ 170 million, based on a previous purchase of about $ 50 million worth of bitcoin and making Bitcoin account for about 5% of the total d Square cash equivalents and marketable securities.
Bitcoin “has the potential to be the Internet’s native currency” and Square wants to “align our incentives” with cryptocurrency, CFO Amrita Ahuja said in a call to reporters after the report.
One of the highlights of Rosenblatt Securities analyst Sean Horgan’s report was Square’s disclosure that Cash’s overall customer acquisition costs were less than $ 5 per user. during 2020, which he said highlighted the company’s “efficient marketing and the effects of the viral network”.
Square currently offers Cash App users the ability to buy and sell bitcoins, as well as a select stock group, which Ahuja said was aligned with the company’s mission to educate investors about trading and make the investment is more accessible and related. “As we think about other cryptocurrencies” or other stocks investing in the platform, Square “will be guided first and foremost by the stability and security of our platform,” as well as the interest of customers, ”he said.
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The payments company generated fourth-quarter net income of $ 294 million, or 59 cents a share, while Square earned net income of $ 391 million, or 83 cents a share, a year earlier. After adjusting for share-based compensation and other expenses, Square earned 32 cents per share, up from 23 cents per share the year before and above the 24-cent FactSet consensus.
Square’s gross payment volume, or the value of payments flowing through the company’s platform, rose to $ 32 billion, from $ 28.6 billion a year earlier.
The company offered some feedback on its January performance, but declined to give a formal financial perspective. Square sellers ’gross profit rose 15% from a year earlier in January, the company said in its shareholder letter, which represents“ a modest improvement compared to the fourth quarter ”. The company also saw its “highest monthly totals of new active customers in transaction for its Bitcoin, Securities and Cash Card products” during January.
Shares of Square have gained 23% in the past three months, as the S&P 500 SPX,
has risen 8%.