Mobile payments company Square (SQ) has recently seen its stock fall 15% after its second-quarter earnings report for this year. One analyst commented on the drop, and claimed Bitcoin is a distraction for the business.
Square’s Cash App has been allowing its users to buy and sell bitcoin since January of last year, and the second quarter of this year out of a total $260 million in revenue it brought in $125 million were from bitcoin trading.
This was the highest quarterly revenue Square has had from bitcoin. The company’s revenue from bitcoin in all of last year was $166 million. Despite the large revenue, Square’s Q2 profits made out of bitcoin trading were only of $2 million.
As Yahoo Finance puts it, $2 million is a small number for a company whose quarterly revenue was of $562 million, and that has a market cap of $30 billion. The company is reportedly working on bitcoin as its CEO Jack Dorsey – who’s also the CEO of Twitter – is a bitcoin fan.
Dorsey, as CryptoGlobe covered, has earlier this year declared during an earnings call “We love you, Bitcoin,” and has in March of last year revealed he sees bitcoin become the world’s “single currency” by 2028.
BTIG analyst Mark Palmer, however, believes Dorsey’s embrace of bitcoin is a distraction for the company that’s now dealing with a lot. He was quoted as saying it’s “something that we think gets much more hype than it’s worth,” as $2 million in gross profit out of bitcoin is a “very small tail wagging a large dog.” He added:
We’re talking about a CEO who said on the record that he believes that bitcoin is going to replace the U.S. dollar as the global reserve currency in the next 10 years, which, I will just leave it at that. People will just have to make their own judgments as to whether that is a prudent comment
Palmer noted Dorsey has a lot on his place with Square, and implied it shouldn’t be focusing on bitcoin because of it. He noted the company’s gross payment volume (GPV) metric has been dropping over the last few quarters, and that it’s currently going after large merchants, meaning it’s competing with larger players like First Data and Global Payments.
On the other hand other analysts, according to Yahoo Finance, do support Square investing in bitcoin-related services. Darrin Peller from Wolfe Research claimed using bitcoin shows Square “is innovative enough to be very quick and try new things with commerce.”
Josh Beck from KeyBanc Capital Markets was quoted as saying adding bitcoin to the Cash app was a “brilliant customer acquisition strategy” that helped the Cash app grow