Square stock edged up Thursday as March-quarter earnings, net revenue and gross payment volume handily beat analyst estimates. In its outlook for Square earnings, the digital payment processor cautioned that government stimulus payments to consumers will wind down, slowing Square Cash App growth.
In the Square earnings report, Bitcoin transactions via the Cash App boosted the top line. San Francisco-based Square‘s (SQ) earnings were 41 cents per adjusted share, up from a 2-cent loss in the year-earlier period.
Gross profit increased 79% to $964 million vs. estimates of $827 million, the company said. Cash App gross profit jumped 71% to $495 million.
Square said net revenue jumped 266% to $5.06 billion as more Cash App users bought and sold digital cryptocurrency Bitcoin. Excluding Bitcoin, revenue rose 44% to $1.55 billion.
Square Stock: Stimulus Payments Impact Cash App Growth
Analysts had projected 16-cent adjusted profit on net revenue of $3.36 billion, including Bitcoin transactions. Square garners low margins from Bitcoin trading. Amid the coronavirus emergency, U.S. government economic stimulus payments to consumers have fueled Cash App growth.
In a letter to shareholders, the company said: “In April, Cash App delivered strong gross profit growth year over year. As we lapped the government fund disbursements in mid-April of 2020, gross profit growth slowed year over year.”
Square stock rose 1.4% to near 227 in extended trading on the stock market today. In Thursday’s regular session, Square stock fell 3.4% as growth stocks retreated.
Square said gross payment volume, or GPV, from merchant customers rose 29% to $33.1 billion. Analysts projected GPV of $30.06 billion.
Adjusted Earnings Metric Takes Off
Adjusted earnings before interest, taxes, depreciation and amortization, known as EBITDA, boomed to $236 million from $9 million a year earlier. Analysts expected adjusted EBITDA of $107 million.
The digital payment processor has not provided 2021 financial guidance. Square stock surged in 2020 as investors focused on the growth of its consumer Cash App. They shrugged off worries over Square’s exposure to small businesses and restaurants that might close because of the coronavirus pandemic.
Square stock trades below an entry point of 283.29. The digital payment processor holds a Relative Strength Rating of 87 out of a best-possible 99.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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