Please ensure Javascript is enabled for purposes of website accessibility

Why Square Stock Dropped Today

By Joe Tenebruso - Feb 24, 2021 at 8:40PM

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

The fintech pioneer is ramping up its exposure to Bitcoin.

What happened

Shares of Square (SQ 8.52%) fell 7.5% on Wednesday, following the release of the digital payments and financial services company's fourth-quarter results. 

So what

Square's revenue soared 141% year over year to $3.2 billion, fueled by a surge in demand for its Bitcoin (BTC 0.24%) trading services. Excluding its Bitcoin business, the fintech leader's revenue rose 23% to $1.4 billion. 

A person is pointing to a stock chart that rises sharply and then falls.

Square's stock price pulled back on Wednesday. Image source: Getty Images.

Notably, Square is growing more profitable as it scales its operations. Its gross profit jumped 52% to $804 million, driven by a 162% surge in Cash App's profits. Square's massively popular peer-to-peer payment platform saw its monthly transacting active customers rise by more than 50% from the prior-year period.

Now what

The strong performance apparently wasn't quite enough for some investors. Expectations may have simply been too high for the fintech star. Square's stock price had tripled over the past year ahead of its fourth-quarter report, and many investors likely decided to take some profits off the table on Wednesday. 

Square also disclosed that it purchased an additional $170 million worth of Bitcoin. Together with its $50 million investment back in October, Bitcoin now represents roughly 5% of Square's total cash reserves. It's possible that some investors are growing concerned with Square's increasing exposure to the volatile cryptocurrency. 

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.
$90.52 (8.52%) $7.11
Bitcoin Stock Quote
$28,912.37 (0.24%) $68.79

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/28/2022.

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.