With 7 million people already using its Cash App, Square’s opportunities in the cryptocurrency realm seem boundless, with one Wall Street firm likening it to “Amazon in its early days’.
Reiterating a buy rating on Square shares Wednesday, Nomura Instinet told clients that Square’s future revenue streams are clearly visible, and with more and more merchants saying ‘yes’ to bitcoin, the company deserves a price target of $64.
Square’s share price responded in kind Wednesday, gaining over 4.4 percent by 1:00pm EST:
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Square’s Cash App is already a huge hit, and now soaring further on the new potential in bitcoin and hints of a possible exchange: But what investors really like is the fact that it doesn’t even matter: Square is solid, with or without bitcoin.
So when you stack new opportunity on top of something that’s already attractive, confidence comes out in the share price.
Square doesn’t need bitcoin. It’s even called it “immaterial”, and while it’s applied for a banking charter, it doesn’t have it yet. In other words, investors like the fact that Square isn’t hyping up bitcoin and banking. It’s a new kind of sobriety that’s devoid of hype.
Square’s Cash App only launched in November, and already it boasts 7 million users. Nomura is impressed already, noting: “Undoubtedly, the success of the Cash App … is a significant achievement. … Currently, an individual can set up the app in minutes and send peer-to-peer payments, store money, receive their paycheck and buy and sell bitcoin.” Related: Why Bitcoin Isn’t Plunging On Google Ad Pull
Future revenue streams are becoming much clear, says Nomura, citing steadily increasing merchant readiness to accept crypto for payment.
In a Wednesday note to clients entitled “SQ Survey: Merchants Say YES! To Bitcoin”, Nomura said the survey showed that “60 percent of the participating merchants would be willing to accept bitcoin in lieu of USD payment. This is particularly interesting given the volatility in bitcoin in recent months.”
What comes next, then, could be huge. Square’s CEO, Jack Dorsey, hinted earlier this month that the company might set out to rival the biggest crypto exchanges on the market, like Coinbase and Kraken.
On a Tuesday conference call following earnings last week, Dorsey said Square’s flirtation with bitcoin might not stop at buying and selling.
It’s not just about stability and security any more. Consumers demand speed, without comprising the rest. As Square CFO Sarah Friar notes, users “want fast access to capital”.
Square knows speed, and now it’s setting itself up to become the Bank of the Future, possibly going way beyond a payments app.
By Fred Dunkley for Safehaven.com
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