Square beats Q2 estimates driven by bitcoin growth

Yahoo Finance's On the Move panel discusses Square's Q2 earnings report.

Video Transcript

JULIE HYMAN: Square is one of them. Those shares are up more than 11% after that company reported after the bell yesterday. One interesting note about that-- it wasn't supposed to report after the bell yesterday. It was supposed to report today. But the company said that there was some kind of external leak of the numbers, so it just released them early.

Melody, I know that you have been watching these numbers carefully, sort of a related note to what we were just talking about with Robert.

MELODY HAHM: Yes, exactly. And Julie, of course, the story behind the story for us journalists-- Bloomberg News did scoop the earnings report a day early. And Square sort of had to scramble to give that official report. And then the CFO did jump on a call with reporters and investors as well.

To your point, it's actually really interesting because the overall quarter was not necessarily a rosy picture, because let's keep in mind, Square has invested a lot of capital into the actual physical devices in retail stores. As many of those have remained shuttered, as there has been a lot more to-go orders and mobile ordering, that segment of the business has actually fallen year-over-year. But when you think about the actual Cash App, which is the competitor to Venmo, that's seen a huge spike over this period of time.

In particular, one thing that was particularly notable to me was that unemployment checks and tax refunds actually were the major tailwinds that drove the momentum in the Cash App itself, as people are exchanging money, and people are actually going out and being able to transact with that capital. Although executives did caution that that could be a sort of blip, and that going forward we may not see as much activity, perhaps, on that sort of small-scale level in exchanging dollars.

But overall, as you point out, the stock did jump as much as 11% in after-hours trading. The stock is up about 145% so far this year. And I do think that even the loan payment side of things, even though that's cooled down a bit, it was driven mostly by the PPP loans, which Square did help facilitate to a certain extent.

So in this case, it's a great example of a fintech company that has been able to diversify. So even though, perhaps, the brick and mortar side of things has been suffering, it's very clear that things like the Cash App have really buoyed it forward.

ADAM SHAPIRO: And part of the headlines on our own website talked about the bitcoin revenue rising 600% within the Cash App. And I'm just curious, is it-- is it sustainable?

MELODY HAHM: No, I personally don't think so. I mean, this is such a-- it depends on the momentum of the average investor, right? And as we've talked about, whether it's gold, whether it's Bitcoin, whether it's the dollar, yes, you can have some sustained momentum, perhaps for a quarter, for a quarter or two, especially during these unprecedented times. And when we're in the face of a pandemic, I do feel as though you can see these sorts of spikes and some sort of interest there.

But I do anticipate that this is going to also be sort of an anomaly, an outlier, if you will, in the overall trajectory of how Square actually makes money.