why SQ holders are so happy with the report if revenues growing in low 20s ex-Bitcoin.
What makes you think Square’s holders are so happy with the report? Square’s share price was down 6-7% after-hours yesterday.
So, what’s the reason for hype? What I’m missing here?
Regardless, if you’re referring to the “hype” as Square’s share price appreciation over the past year or so, I’ll attempt to provide a few reasons:
(1) The ability for Cash App to establish itself as a leading financial service ecosystem. In December, Cash App had >36M active transacting customers in December (up 50% YoY), increasing its gross profit 162% YoY. Large financial institutions have been slow to adapt to the rise of digital wallets, and Square is eating their lunch here.
(2) The ability for Seller business to expand its monetization as the economy reopens. The Seller business processed nearly $30B. While its growth was only 13%, the narrative is that this will accelerate as the economy reopens. Square has expanded the suite of products it offers sellers - it is becoming a “one stop shop” with payroll, lending, capital, and other offerings.
(3) Integrating Cash App + Seller business. Square currently incurs billions in transaction expenses that it pays across different layers of its value chains (i.e. all of the middlemen involved in a banking transaction - such as payment processing, authorization, etc). As it continues to grow its Cash App and Seller business respectively, Square will have an opportunity to transact payments directly without the middlemen.
(4) Global expansion in the early stages. Square seems to be focusing on continued growth in the US primarily, and the few international markets its in. There is a massive opportunity for it to continue consolidating its Cash App + Seller ecosystem across new markets.
(5) Bitcoin/crypto cross-selling & expansion. I know its common to exclude Bitcoin revenue from Square’s analysis - but worth paying attention to it regardless. I’ll refrain from expanding on Bitcoin too much to abide by this forum’s rules, but its clearly crossing the chasm and Square is well-positioned to take advantage of its growing popularity.
I encourage you to skim Square’s latest shareholder letter to understand some of these points further: https://squareinc2020ir.q4web.com/files/doc_financials/2020/…
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