The ongoing transformation of the payments industry, driven by technological advancements and shifting consumer preferences, creates significant opportunities for top growth stocks like Square (SQ2) to expand its market presence. Block has established critical partnerships that enhance its service offerings and expand its distribution network, becoming one of the growing companies to invest in.
Block Inc (ASX: SQ2)
Block Inc (ASX: SQ2) launched the Square ecosystem in February 2009. The Square ecosystem was created to enable businesses ("sellers") to accept card payments, a service previously out of reach for many. Over time, Square has expanded its offerings to provide a comprehensive suite of tools for managing and growing businesses. Alongside Square, Cash App was developed to offer a wide range of financial products and services to individuals, helping them manage their money more effectively. In January 2022, Square completed the acquisition of Afterpay, a leading buy now, pay later (BNPL) platform, further strengthening its ecosystem by offering consumers the ability to make purchases in installments. Additionally, Square operates TIDAL, a global platform for music, and TBD, an open developer platform aimed at driving economic empowerment.
In Q3 2024, Square's business saw impressive growth, generating a gross profit of $2.2 billion, which was up 19% year-over-year. Cash App contributed significantly with $1.3 billion in gross profit, up 21% from the previous year, thanks to strong performance in its financial services products. Square itself recorded a gross profit of $932.4 million, a 16% increase year-over-year, driven by growth in its banking products and integrated payment solutions. The company's operating income for the quarter was $323.0 million, while adjusted operating income surged to $443.5 million, a significant improvement from a loss in the same period in 2023.
The company is among high growth stocks with a total net revenue for the third quarter of 2024 increased by $358.3 million, or 6%, compared to the previous year. Bitcoin revenue also showed a sharp increase, contributing $5.0 million and $793.3 million in the three and nine months of 2024, respectively. Excluding Bitcoin revenue, total net revenue grew by 11% and 13% in the three and nine months of 2024, respectively, primarily driven by Square's transaction-based revenue and subscription-based services. Square's GPV (Gross Payment Volume) increased 4% in Q3, benefiting from stronger performance in both card-present and online payments.
Square also operates warehouse funding facilities with a total revolving capacity of $1.5 billion, of which $965.8 million had been drawn as of September 30, 2024. These facilities are used to fund the BNPL platform and are secured against consumer receivables. The receivables are held by separate legal entities known as Warehouse Special Purpose Entities (SPEs), which do not affect Square’s consolidated financial position. As of Q3 2024, Square had strong liquidity, with $10.7 billion in available resources, reflecting an increase of $3 billion from the end of 2023.
Source: Company’s Report
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