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Square Boosts Bitcoin Presence With BitLicense in New York

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Square, Inc. (SQ - Free Report) is leaving no stone unturned to bolster presence in the cryptocurrency market which is growing at a rapid pace.

Recently, the company has received the virtual currency license called BitLicense from New York State Department of Financial Services. This license will allow Square to facilitate bitcoin trading to its Cash App users residing in the state of New York.

Following this announcement, shares of Square have improved 2.7% and rallied to a new 52-week high of $66.44, eventually closing a tad bit lower at $66.2 on Jun 18.

Notably, the stock has returned 91% on a year-to-date basis, significantly outperforming the industry’s rally of 23.5%.

We believe the recently obtained license is likely to improve the user base of Cash App with the emerging concept of bitcoin. Notably, crytocurrency is gaining immense popularity in today’s digital world. This will aid the market share and revenue generation of the company.


Cryptocurrency Holds Promise

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

Per the latest data from Markets and Markets, the global cryptocurrency market is expected to grow at a CAGR of 32.31% between 2017 and 2023 and to reach $2.9 billion by 2023.

Square forayed into the bitcoin space earlier this year by facilitating buying and selling of bitcoins via its Cash App. The service was rolled out all the states of the United States except New York in which it has now got license.

Consequently, Square is well poised to reap benefits from this rapidly growing market with its strong focus toward expansion of its bitcoin facilities geographically.

Last quarter, the company performed very well with its new bitcoin trading feature on Cash App. Bitcoin revenues played an important role in driving its top-line growth.

The company’s net revenues were $669 million which improved 44.8% year over year. Square’s bitcoin revenues came in $34.1 million excluding which its net revenues would have been $635 million and surging 37% from the year-ago quarter.

Intensifying Competition

By rolling out the bitcoin trading feature on Cash App, the company has gained competitive edge against PayPal’s (PYPL - Free Report) Venmo. Both Cash App and Venmo provide peer-to-peer payment services which make payment process smoother and faster.

Square announced its plan to enter the market of cryptocurrency during the end of 2017 which aided it in accelerating user base. The company’s recent letter to its shareholders revealed that Cash App acquired 7 million active customers in December 2017.

Per the analysis by Normura Instinet, since 2016, the average year-over-year growth of downloads via Cash App is 128% per month which is way ahead of 74% growth of downloads via Venmo.

Moreover, by entering the cryptocurrency market of New York, the company has strengthened its competitive position against its peers involved in cryptocurrency trading in the state such as Coinbase, Circle, Xapo, Genesis, bitFlyer to name a few.

We note that global expansion of Cash App along with bitcoin trading facility will continue to benefit the customer base of the company which will help in gaining momentum.

Zacks Rank & Stocks to Consider

Currently, Square carries a Zacks Rank #3 (Hold).

A few better-ranked stocks that can be considered in the broader technology sector are Twitter (TWTR - Free Report) and Upland Software (UPLD - Free Report) . Both the stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Twitter and Upland Software is currently pegged at 23.1% and 20%, respectively.

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