Having changed the payment processing game, Square (NASDAQ: SQ ) is looking for new games to play. Remember, Square added banking services to processing, like loans and accounting services. This allowed it to grow with the tiny businesses that first got its processing dongle because it was simple and portable.
Source: Via Square
But while the processors are protecting their turf by surrounding their services with software, Square is branding new services to expand its reach.
Bitcoin and Cash
One of those is Bitcoin . Square recently hired a former Alphabet (NASDAQ: GOOG , NASDAQ: GOOGL ) executive, Steve Lee , to run its Bitcoin platform and, needless to say, crypto enthusiasts are very excited.
So is Square co-founder and CEO Jack Dorsey. He considers Bitcoin the native currency of the internet, and the internet to be bigger than any nation state. Thus, Bitcoin will become a global currency , he believes.
Dorsey is also down on cash and expects apps like his own Square Cash to replace it. Nomura Instinet says 2.2 million downloads of Square Cash were made in May, which was even more than Paypal’s (NASDAQ: PYPL ) Venmo.
With Square Cash acting as a bank account and Bitcoin becoming a global currency, Square is aiming for the purchaser side of transactions, not just the merchant processing side. It’s also hoping to get past its transaction processing rivals, jumping ahead of Visa (NYSE: V ) with its own processing system.
Analysts Love Square Stock
Hype and growth let Square grow its own market cap despite a distinct lack of profits.
Net losses have risen for four quarters, to $38 million in the March quarter, and it’s expected to barely break even for the current quarter, which will be reported July 31. Still, the shares are up 29% so far in 2019, right in line with Visa, which has both earnings and a dividend.
Growth has been spectacular, roughly 50% in 2018, and 45% year-over-year in the March quarter. Bears might note that the research budget, and other general expenses, are rising right along with revenue. But Jack Dorsey’s reality distortion field keeps attracting investors. Between them Square and Twitter (NASDAQ: TWTR ), the other publicly traded company he runs, have a market cap of about $59 billion.
Where Next for SQ Stock?
Square’s latest move is to consolidate its offerings for specific verticals. Restaurants , for instance, can now get full integration between their table service and delivery apps like Postmates and DoorDash . This means all their money flows through one place, and one account. The product also connects with Square Payroll and Square Capital.
What this illustrates is how Square, rather than being just a threat to processors, is increasingly a threat to banks. Square is using accounting to draw bank business from merchants, just as banks once used processing to draw businesses to them. It has changed the game.
The risk in being everything to a business, of course, is what happens when Square goofs, as it did recently in e-mailing receipts to the wrong parties. So far, the market has been forgiving.
The Bottom Line
Our James Brumley has written that while the honeymoon with Square is over, the company seems prepared for a marriage . He expects Square to become profitable and less volatile.
But some volatility can be expected with Dorsey, who is using Square to push his favorite issues, like the integration of immigrants , and seems less interested than ever in being the kind of buttoned-down CEO Wall Street expects.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new environmental story, Bridget O’Flynn and the Bear , available now at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn . As of this writing he owned shares in GPN.
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