Please ensure Javascript is enabled for purposes of website accessibility

What I'm Watching in Square's Earnings Report

By Matthew Frankel, CFP® - Feb 6, 2021 at 6:36AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Square has had an incredible run. Here's what could end up driving the stock even higher.

Up by about 2,700% over the past five years, fintech giant Square (SQ -9.02%) has been an incredible performer for its investors. While growth in the payment processing side of Square's business isn't as exciting as it once was, there's still quite a bit that could take Square to the next level.

In this Fool Live video clip recorded on Jan. 25, Fool.com contributor Matt Frankel, CFP, discusses what he's watching when Square reports its fourth quarter earnings on Feb. 23. 

Matt Frankel: Square's news, more Bitcoin stuff. Square bought Bitcoin as an investment. The fact that they are actually investing their balance sheet in Bitcoin to some degree is probably my least favorite thing about the company right now. I just think it's an unnecessary risk. If you really want my opinion about it. But the Cash App monetization has been absolutely phenomenal and Bitcoin does have a lot to do with it. I mentioned Cash App accounts for about one-fourth of US Bitcoin volume, which is pretty amazing. When you think about some of the big players like Coinbase and Gemini and things like that. For Cash App to be that much Bitcoin volume, and like I said, with PayPal (PYPL -3.12%) and being able to use and buy Bitcoin, it increases user engagement. If being able to buy Bitcoin on Square has been driving user engagement of the Cash App, it's very worthwhile. Cash App gross profit has more than tripled year-over-year in the third quarter, and Bitcoin had a lot to do with that. I'm curious to see how that goes going forward. Square's total net revenue was up 140% year-over-year. It's really tough to make the case of that there was anything wrong with Square's third quarter. So we'll see if they actually announce a flawless fourth-quarter again. We'll probably get our once annual update on Cash App active users. A couple of years ago it was seven million then it was about double that, about 15 million, then it has doubled again since then. I think they gave a little interim announcement. That's where that 30 million users figure came from, earlier in the pandemic. But I'm curious to see their year-end numbers. I'd be really shocked if it didn't grow even more from then. Especially with all this renewed interest in Bitcoin over the past four or five months. That's really what I am looking at. It's mostly to do with the Cash App. Their payments business is going to be great. It's going to gradually grow over time. I'm more worried about the Cash App side of the business.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Block, Inc. Stock Quote
Block, Inc.
SQ
$75.88 (-9.02%) $-7.52
PayPal Holdings, Inc. Stock Quote
PayPal Holdings, Inc.
PYPL
$78.65 (-3.12%) $-2.53

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
334%
 
S&P 500 Returns
117%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.