Square Earnings Focuses On Cash App (And Bitcoin)
For Square, the (earnings) song may remain much the same, at least this time around. To that end, the Cash App, digital payments and, of course, bitcoin will be much in focus when the digital payments firm reports earnings after the bell on Tuesday (Feb. 23).
The Street expects to see adjusted EPS grow to 25 cents a share (up a bit more than 4 percent), while sales are projected to be $3.2 billion, which would be up 137 percent year on year. Seeking Alpha reported that consensus has pegged gross payment volume at $32.1 billion.
The key, overarching trends are almost certain to still be in place, of course – notably, the rise of card-not-present transactions and digital payments. To get a sense of that growth: Card-not-present GPV was up 24 percent year over year in the third quarter, while card-present GPV was down 5 percent year over year.
Larger sellers have been a relatively outsized component of the overall Square ecosystem: 61 percent of the GPV came from larger sellers with volumes of at least $125,000 annually compared with 53 percent a year ago, per the latest results, which chronicled the third quarter of 2020.
For Square, Cash App is seeing increased traction, and management will likely illuminate new use cases for an offering that, as evidenced in the latest quarter, has been seeing triple-digit percentage growth on an annual basis on the wings of omnichannel commerce, as well as an uptake in digital wallets. It will be important to strip out the impact of bitcoin from Cash App to get a clear picture of payment trends. Supplemental materials provided by the company will likely give updated active user counts.
Bitcoin On The Balance Sheet
Look, too, for commentary surrounding bitcoin, the digital currency that has seen no shortage of headlines, as the cryptocurrency’s price has been, to put it mildly, volatile. Square had said in the fourth quarter of last year that it had invested $50 million in bitcoin, and those holdings will be worth multiples of that as of the quarter-end reporting. Key to the bitcoin story will be what Square management (CEO Jack Dorsey in particular) sees as the developing use cases of bitcoin in terms of everyday commerce.
Square has disclosed that transactions tied to Cash App have been used widely across the largest verticals of food, drink, retail and home repair. Cash App has become increasingly woven into the fabric of everyday financial life for these users (and where direct deposits of stimulus funds and recurring paychecks have cemented the use of the app). At the end of the third quarter of 2020, Cash App customers had more than $1.8 billion in cash balances stored in their accounts, up 180 percent year over year.
Management has already given some insight into what the beginning of the fourth quarter looked like: In the initial first weeks of the quarter, after the end of September, the company said that in October, seller GPV was up 8 percent year over year. Seller GPV from card-not-present transactions was up 23 percent year over year in October. Card-present transactions also rebounded, up 1 percent year over year in the month of October.