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Square Invests in Bitcoins to Boost Cryptocurrency Footprint

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Square (SQ - Free Report) is leaving no stone unturned to bolster its presence in the promising cryptocurrency market as it continues to ride on its bitcoin offerings.

This is evident from its latest investment of $50 million to purchase 4,709 bitcoins.

We note that the move increases the company’s bitcoin reserve, which will enhance its cryptocurrency offerings.

This, in turn, is expected to accelerate Square’s bitcoin revenue generation in the near term. Additionally, the strengthening bitcoin offering is likely to deliver an enhanced experience to customers of Cash App through which the company facilitates bitcoin trading.

Bitcoin Space Holds Promise

The emerging bitcoin market holds great potential for growth,driven by increased penetration of internet and online payment services globally.

According to a report from Mordor Intelligence, the global bitcoin technology market is expected to reach $477.05 million by 2025 by witnessing a CAGR of 8.3% between 2020 and 2025.

Further, a report from Fortune Business Insights, the worldwide cryptocurrency market is expected to $1.7 million by 2027 from $754 million in 2019 by witnessing a CAGR of 11.2% between 2020 and 2027.

Consequently, Square is well-poised to reap benefits from the rapidly growing market on the back of its latest move and strong focus toward the expansion of its bitcoin facilities.

Square, Inc. Revenue (TTM)

 

Square, Inc. Revenue (TTM)

Square, Inc. revenue-ttm | Square, Inc. Quote

Bottom Line

Square announced its plan to enter the market of cryptocurrency at the end of 2017 and forayed into it in 2018 by facilitating the buying and selling of bitcoins via its Cash App.

Notably, bitcoin trading has been driving growth in the company’s user base since then. Moreover, bitcoin revenues have turned out to the key catalyst behind the company’s top-line growth.

In second-quarter 2020, Square generated revenues of $875.5 million from the bitcoin category (45.5% of total revenues), up a whopping 600% on a year-over-year basis. The company witnessed strong customer demand and growth in bitcoin actives in the second quarter.

We note that expanding bitcoin offerings on the back of its increasing reserve will continue to aid the company in gaining further momentum among customers.

Zacks Rank & Stocks to Consider

Currently, Square carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader technology sector are Zoom Video Communications, Inc. (ZM - Free Report) , eGain Corporation (EGAN - Free Report) and Digital Turbine, Inc. (APPS - Free Report) . While Zoom Video and eGain currently sport a Zacks Rank #1 (Strong Buy), Digital Turbine carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Zoom Video, eGain and Digital Turbine is currently pegged at 25%, 20% and 50%, respectively.

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