Square’s 1Q Results Top Estimates; Street Sees 27% Upside


Square (SQ) posted total net revenues of $5.06 billion in 1Q, a jump of 266% year-on-year. Excluding revenue from bitcoin, total net revenue was $1.55 billion, an increase of 44% year-on-year. Analysts had forecast revenues of $3.3 billion.

Square reported adjusted net income of $0.41 per share topping analysts’ estimate of $0.17 per share.

The company stated its reasons for deducting bitcoin revenue from total revenues in its shareholder letter. “We deduct bitcoin revenue because our role is to facilitate customers’ access to bitcoin. When customers buy bitcoin through Cash App, we only apply a small margin to the market cost of bitcoin, which tends to be volatile and outside our control.”

The company’s investment in bitcoin has paid off handsomely as bitcoin revenues made up 69.4% of total revenues in 1Q. Square has invested $220 million in Bitcoin so far. Transaction-based revenues were up 27% year-on-year to $960 million and made up 18.9% of the company’s total revenues.

Square reported gross payment volumes (GPV) of $33.1 billion, a growth of 29% year-on-year, and adjusted EBITDA of $236 million, up 85% year-on-year in 1Q. Gross profit from the company’s cash app popped 171% year-on-year to $495 million. (See Square stock analysis on TipRanks)

Following the earnings, BTIG analyst Mark Palmer reiterated a Buy and a price target of $295 (31.7% upside) on the stock. Palmer noted, “We believe the acceleration of the growth of SQ’s Cash App amidst the COVID-19 pandemic has been a game-changer for the company by dramatically expanding its user base and becoming the means through which many unbanked and underbanked consumers receive government transfer payments and transact.”

“At the same time, the company’s Seller ecosystem has recovered faster than expected from the impact of the pandemic and its prospects for international growth are promising,” Palmer added.

Overall, consensus among analysts is a Moderate Buy based on 20 Buys, 9 Holds, and 3 Sells. The average analyst price target of $284.62 indicates upside potential of 27.1% from current levels.

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