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Is the Square share price a buy to hold investment after another blowout quarter?

Squares [SQ] share price popped over 10% Monday morning following Sundays surprise release of second-quarter earnings. In the quarter, the payment provider posted earnings of $0.40 a share, with total net revenue coming in at $4.68 billion, up 143% year-on-year.

Square has been topping Wall Streets expectations and this time was no different, making it five beats in a row. Analysts had been expecting Square to post earnings of $0.30 a share in the second quarter, up from $0.18 a share in the same quarter last year.

Bitcoin costs came in at $2.67bn in the second quarter, despite the cryptocurrency bringing in $2.72bn in revenue. Squares big bitcoin bet had also weighed on earnings in the first quarter when it posted a $20m loss on its bitcoin investment.

$4.68billion

Square's Q2 net revenue - a 143% YoY rise

  

Another surprise was the announcement that Square was buying Australian firm Afterpay in a $29bn all-stock deal as it sought to cash in on the buy now, pay latertrend.

After the initial pop, Squares share price closed down 1% Tuesday. However, following this set of solid numbers, the payments provider could represent a long-term opportunity.

 

Whats happening with Squares share price?

Squares share price performance this year might come as a disappointment for anyone expecting the same kind of outsized performance experienced last year.

In 2020, Squares share price gained just over 245% on what was a near-continuous upward trend from mid-March. The big growth driver was the pandemic, with retailers quickly having to transition online as bricks and mortar shops were shut during lockdown, while customers ditched cash for contactless payments. The other big growth driver was Squares Cash App, which delivered $1.23bn in gross profit in 2020, up 168% year-on-year.

245%

Square's share price gains in 2020

  

But 2021 hasn't been a write-off either with Squares share price up over 25% since the start of the year. And Square's exposure to long-term thematic growth trends make it a stock to buy and hold forever, according to The Motley Fools Prosper Junior Bakiny.

 

Is Square a long-term investment?

Bakiny suggests that Squares long-term plan to deliver banking services to underserved communitiesis where the potential is, citing Squares Cash App and Seller ecosystem.

In the second quarter, Cash App pulled in a gross profit of $546 million, up 94% year over year. Squares Seller ecosystem also had a robust quarter,  generating gross profit of $585 million, up 85% year over year. In February, chief financial officer Amrita Ahuja said Cash App had a total addressable market of $60bn during an earnings call.

Cash Apps strong numbers this quarter follow on from the app delivering $495m in gross profit in the first quarter, up 171% year over year.  In June, Cash App had 40m monthly transacting users with Square saying that it was focusing marketing efforts to attract more customers on to Cash App who could use more [Square] products and bring greater funds into our ecosystem. As Cash App grows, bringing in more funds that can be used on the wider product ecosystem, then Squares share price could keep gaining.

“As customers find value across our ecosystem, they have brought more money into Cash App: Inflows per monthly transacting active customer nearly doubled compared to two years ago, benefiting from recent increases in consumer spending” - Square's shareholder letter

 

As customers find value across our ecosystem, they have brought more money into Cash App: Inflows per monthly transacting active customer nearly doubled compared to two years ago, benefiting from recent increases in consumer spending,” Square said in its second-quarter shareholder letter.

Among the analysts tracking Squares share price on Yahoo Finance, the stock has an average $276.70 price target - hitting this would see a 2.7% upside on Tuesdays close. Of the 31 analysts offering recommendations, 4 rate Square a Strong Buy and 13 a Buy.

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