Square Analysts React To Q4 Earnings: 'Deceleration Somewhat Surprising'

Square Analysts React To Q4 Earnings: 'Deceleration Somewhat Surprising'

Square Inc SQ shares dropped 6% despite the digital payment company reporting a fourth-quarter earnings beat on Tuesday afternoon.

Square reported fourth-quarter adjusted EPS of 32 cents on revenue of $3.16 billion. Both numbers topped consensus analyst estimates of 24 cents and $3.1 billion, respectively. Revenue was up 139.6% from a year ago.

Despite the impressive fourth-quarter numbers, Square said gross profits were up just 15% in January, suggesting a significant drop in growth in 2021. The company also reported buying $170 million in Bitcoin (CRYPTO: BTC), which now represents about 5% of Square’s total cash position.

Deceleration Concerns: KeyBanc analyst Josh Beck said transactions and bitcoin revenue exceeded his expectations, while subscription and services growth slightly missed his targets.

"Encouragingly, multi-product Cash App users generate a 3-4x gross profit improvement, 130%+ retention, one-year payback, and a CAC of $5, supportive of our OW thesis on sustained hypergrowth prospects,” Beck wrote in a note.

Raymond James analyst John Davis said the January deceleration in Cash App growth was “somewhat surprising.”

“Despite better than expected Cash App gross profit growth in 4Q (162%) that included a significant acceleration in Dec (est ~180% vs. 140% in Nov and 160% in Oct), GP growth has surprisingly decelerated YTD as management called out 164% growth in Jan and 130% in Feb despite additional stimulus,” Davis said.

Cash App A Cash Cow: Rosenblatt Securities analyst Sean Horgan said Square is moving full steam ahead, with Cash App monthly active users topping 35 million.

“We expect shares to move higher driven by continued strength in Cash App customer acquisition and efficient monetization, all of which were on full display in 4Q,” Horgan wrote.

Needham analyst Mayank Tandon said Cash App continues to be a cash cow for Square.

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