Shares of Square Inc (NYSE:SQ) went up by almost 5% on Wednesday following an analyst prediction that the company stands to record improved first quarter results due to its adoption of bitcoin. Square Inc is a payment processing company and owns Square Cash, a mobile payment app. The company started bitcoin trading at the start of this year.
According to a report done by Dan Dolev, a Nomura Instinet analyst, the company will see a “sizable boost” to its profits and revenue in the first quarter of 2018 plus a 10% potential increase to adjusted EBITDA guidance.
The tech company started bitcoin trading on January 31st, and according to Dolev, the company will see an addition of $125 per user every year. He adds that around 2-6% of users of Square Cash app are engaged in bitcoin trading which will lead to a 1-3% increase in adjusted revenue as well as up to 10% rise in adjusted EBITDA.
Jack Dorsey, the founder and CEO of Square was quoted last month saying that bitcoin is likely to become the most dominant and sought after form of payment in the next ten years. He says that the world and internet is now ready to have a single currency.
The company’s shares went up by 4% in January when the CEO announced that the app could allow users to buy and sell bitcoin. This service is still not available to users in Georgia, Wyoming, New York and Hawaii.
In a note to clients on Wednesday, Dolev said that the move by the company to allow bitcoin trading will help in offsetting the rising costs of investments which is required to broaden its presence in the international market. Instinet restated its buy rating for Square and raised the price target to $65. This is 15% increase from what the company was trading on Wednesday. According to Dolev, the bullish call is as a result of more disruption in the payment sectors as well as additional-higher margin products and services. The company’s stock has gone up more than 48% this year.
Dorsey, who is also the Co-founder and CEO of Twitter has been bullish and optimistic about the future of digital currency. In March, he said that bitcoin is likely to become the world’s single currency. Recently, Twitter, which is based in San Francisco, banned all cryptocurrency ads on its platform.