Square’s Q2 Earnings Beat Estimates, Revenue Misses; Shares Pop 10%

Square (SQ) shares jumped 10.16% after the financial services company delivered strong second-quarter results. Net revenue for the quarter was up 143% year-over-year to $4.68 billion but fell short of consensus estimates of $4.99 billion. Excluding Bitcoin revenues, total net revenue was up 87% year-over-year to $1.96 billion.

Cash App delivered yet another strong quarter, generating $3.33 billion in revenue and $546 million in gross profit. Total gross profit was up 91% year over year to $1.14 billion. Square also posted earnings per share of $0.66, better than the $0.30 a share expected by the Street.

The better than expected results come on the back of customers finding value across Square’s robust ecosystem. As most of them adopt more products, the company generates more money through its Cash App.

Software and integrated payments remain some of the fastest-growing products in the company’s ecosystem, delivering annual gross profit growth of nearly 50%. (See Square stock charts on TipRanks)

“In June, Cash App reached 40 million monthly transacting active customers. With our marketing efforts, we are focused on attracting customers who could use more products and bring greater funds into our ecosystem,” Square said in a press release.

During the quarter, Square acquired a majority ownership stake in Tidal. The acquisition provides an opportunity for the company to provide artists with tools to participate in the economy and grow as entrepreneurs.

Yesterday, Deutsche Bank analyst Bryan Keane reiterated a Buy rating on the stock following reports that the company is poised to acquire Afterpay. The analyst expects the acquisition to enhance the Seller and Cash App ecosystems’ connection, consequently increasing the velocity of payment flows. The deal should also drive more commerce opportunities between consumers and merchants.

Consensus among analysts is a Strong Buy based on 19 Buys, 4 Holds, and 1 Sell. The average Square price target of $297.43 implies 9.20% upside potential to current levels.

SQ scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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