Square Inc, the payment processing service provider, reported exceptional fiscal 2021 first-quarter results aided by a sharp rise in the demand for Bitcoin (BTC) that boosted the volume of transactions on Cash App, the firm’s P2P (peer-to-peer) payment service.
The stock ended Friday’s trading session at $233.35, up to $9.39 or 4.19% from the previous close, following the impressive results.
San Francisco, California-based Square reported Q1 2021 revenues of $5.057 billion, compared with $1.381 billion in Q1 2020.
During the first quarter that ended March 31, 2021, Square swung to a profit of $39.008 million, or $0.08 per share, from a net loss of $105.891 million, or $0.24 a share, in the first quarter that ended March 31, 2020.
Excluding share-based compensation expenses, amortization of intangible assets, amortization of debt issuance costs, and Bitcoin impairment losses, among others, Q1 2021 adjusted net income was $217.664 million, or $0.41 per share, compared with a net loss of $7.29 million, or $0.02 a share in Q1 2020.
Analysts surveyed by Refinitiv had anticipated the company to report a earnings of $0.41 per share on revenues of $3.36 billion.
Segment-wise,
- Transaction-based revenue increased 26.6% y-o-y to $959.733 million.
- Subscription and services-based revenues were $557.681 million, up 88.3% from last year.
- Hardware revenues rose by 39.2% to $28.788 billion.
- Bitcoin revenue was $3,511,068, an increase of 1047% on a y-o-y basis. But bitcoin’s gross profit was only $75 million, or approximately 2% of revenue.
For the recent quarter, gross profit increased 79% y-o-y to $964 million. Likewise, the gross profit of Cash App, P2P (peer-to-peer) rival to Venmo, rose by 171% y-o-y to $495 million.
Earlier in March, Cash App started providing clients the ability to remit Bitcoin on a real-time basis for free of cost.
During the earnings call, CEO Jack Dorsey stated that Square views Bitcoin as the crypto, which can turn into the native currency of the internet. Dorsey further said that his firm would promote the numero uno crypto as the internet’s currency.
Along with the facility to buy and sell Bitcoins via Cash App, the company established the Cryptocurrency Open Patent Alliance (COPA), an open-source foundation for cryptocurrency patents. The organization has been created to safeguard the sector.
Notably, back in October 2021, Square invested $50 million in Bitcoin. Again, the company purchased Bitcoin for $170 million in February.
In its quarterly report, the company revealed that the hypothetical loss on the investment made in the first quarter is $20 million. Overall, the value of Bitcoin held at the end of the first quarter was roughly $472 million, based on recent market prices.
In the future, on a y-o-y basis, the company anticipates gross profit to increase by over 135% for its vendor platform in April. Likewise, for a similar period, Square expects its Cash App to post roughly 130% gains.
Furthermore, the company’s CFO, Amrita Ahuja, stated that the company anticipates gross profit growth rates to slow down from April to the rest of 2Q 2021, on a y-o-y basis, as growth rate parameters turn hard in the months ahead.
The quarterly earnings beat is expected to spark another round of uptrend in the stock soon.
The historical price chart indicates that the stock is trading along the ascending trend line, as shown in the image below. Additionally, the stochastics RSI indicator is also in the oversold region. Therefore, we are anticipating the stock to remain in an uptrend in the near term.
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