Square wants to build out app that accepts bitcoin, but spending plans stall stock
‘Bitcoin, for us, is not stopping at buying and selling,’ CEO Jack Dorsey says after Square earnings beat
J.P. Morgan Chief Executive Jamie Dimon said at the company’s investor day on Tuesday that one big thing his company regrets missing out on over the past few years was creating a platform like Square Inc.
Dimon might be feeling that regret even more deeply Tuesday afternoon, after Square posted another strong quarter of results and pledged to spend more to build out initiatives like Square Cash. The Venmo rival has generated a lot of buzz of late for allowing users to buy and sell bitcoin, the cryptocurrency that Dimon has expressed mixed feelings about, and Square’s chief executive wants more.
“Bitcoin, for us, is not stopping at buying and selling,” Jack Dorsey said on a conference call Tuesday. “We do believe that this is a transformational technology for our industry, and we want to learn as quickly as possible.”
Shares of Square bounced between gains and losses of less than 2% in after-hours trading Tuesday despite the earnings beat, possibly the result of a first-quarter forecast that came in below estimates. Square expects 3 to 5 cents a share in earnings for the first quarter, while analysts had been predicting 8 cents, according to FactSet.
On a call with selected media members following the release, CFO Sarah Friar attributed the forecast to the company’s investment efforts, which include a big hiring push.
“We’re going hard on the recruiting side to bring in incredible talent,” Friar said.
On the banking side, Square plans to invest in areas where the company believes it has a “huge competitive advantage,” Friar said, which includes the Square Cash peer-to-peer payment app. Square for the first time on Tuesday disclosed active-customer numbers for the Cash platform, disclosing that it topped 7 million users in December, and that those using the Square Cash debit cards spent more than $90 million.
Venmo, the more prominent peer-to-peer service owned by PayPal Holdings Inc. didn’t disclose user data in its recent earnings report, though it did report $35 billion in volume processed. Square didn’t share a comparable statistic for Cash.
Friar said that bitcoin trading on Square Cash was “still not material to our results” in the period, but added that the fraud-protection tools that Square uses to gauge whether in-store transactions are fraudulent have proven useful on the bitcoin side of the business as well.
Square is particularly focused on bolstering its omnichannel, banking services and international businesses. The company is trying to gain share in Canada, Japan, Australia and the U.K., and also mentioned a desire to invest in its instant-deposits platform and the Square Capital loan service.
Overall, Square grew revenue and adjusted revenue by 36% and 47%, respectively, during the quarter, which marked an acceleration in growth from the prior quarter.
Friar also cited typical winter seasonality in regards to the first-quarter forecast, explaining that January and February tend to be relatively slow months for commerce, while things tend to rebound a bit in March.