Institutional attention for Bitcoin (CCC:BTC-USD) is on the rise. The most recent driver has been Tesla’s (NASDAQ:TSLA) announcement that it bought $1.5 billion in Bitcoin and would accept BTC as payment.
Now market participants wonder if other businesses will start buying the world’s leading cryptocurrency. As I write, BTC price is hovering around $50,000. It has returned about 400% in the past 12 months. Therefore, today’s article introduces seven companies that could buy Bitcoin next.
Over the past several years, a large number of market participants have been investing in Bitcoin, leading to significant price gains since 2009. However, investors’ objectives are somewhat less clear than with more traditional asset classes, such as stocks. For instance, institutional investors highlight Bitcoin’s “potential as a hedge against inflation.” They see BTC as ‘digital gold.’
Similarly, recent research led by Thomas Conlon and Richard McGee of Ireland’s University College Dublin points out, “Bitcoin has been proposed as a safe haven for traditional assets for many reasons, including independence from monetary policy, a role as a store of value and limited correlation with traditional assets.”
“I think we’re going to hear about more companies putting this hedge [bitcoin] on their balance sheet … particularly tech companies who understand the technology and are comfortable with it,” Cathie Wood, CEO of Ark Investment Management, recently said in an interview. Ark’s annual research report also reveals, “if all S&P 500 companies were to allocate 1% of their cash to bitcoin, its price could increase by approximately $40,000.”
With that information, here are seven companies that are might buy Bitcoin in the coming months:
- Amazon (NASDAQ:AMZN)
- Apple (NASDAQ:AAPL)
- Mastercard (NYSE:MA)
- Oracle (NYSE:ORCL)
- Overstock.com (NASDAQ:OSTK)
- Silvergate Capital (NYSE:SI)
- Square (NYSE:SQ)
Bitcoin Buyers: Amazon (AMZN)
- 52-week range: $1.626.03 – $3.552.25
- 1-year price change: Up about 47%
As the leading online retailer in the world, the Seattle, Washington-based Amazon needs little introduction. It is also one of the most important names in the cloud space.
How could the e-commerce giant bring Bitcoin usage to the mainstream? The answer is not an easy one as Amazon has so far resisted cryptocurrency usage due to price volatility and uncertainty about future regulation. On the other hand, rumors are circulating that the tech giant is devising plans to launch its own digital currency. Such a move could easily provide tailwinds for both for AMZN stock and cryptocurrencies like BTC.
Amazon announced fourth-quarter financial results for the period ended Dec. 31, 2020 in early February. Net sales increased 44% to $125.6 billion, compared with $87.4 billion a year ago. Net income shot up to $7.2 billion in the fourth quarter, or $14.09 per diluted share, compared to a net income of $3.3 billion, or $6.47 per diluted share, in Q4 2019. This represents a stellar 120% YoY increase in net income. Free cash flow also increased to $31.0 billion for the trailing 12 months, compared with $25.8 billion in the previous year.
The company benefited from the shift toward e-commerce during the pandemic. Meanwhile, Amazon Web Services has become the world’s largest cloud infrastructure platform. It is now Amazon’s most-profitable business segment, generating 59% of Amazon’s operating profits in FY20. Analysts have also been impressed with the company’s margin performance.
CEO Jeff Bezos cited, “When you look at our financial results, what you’re actually seeing are the long-run cumulative results of invention. Right now I see Amazon at its most inventive ever.”
AMZN stock’s forward price-to-earnings and price-to-sales ratios are 64.1 and 4.33, respectively, pointing to frothy valuation levels. I believe most of the short-term growth has been factored into this current price. If you are not yet a shareholder, you may want to wait for a potential decline in stock price. An entry point around $3,150 would offer a better margin of safety.
- 52-week range: $53.15 – $145.09
- 1-year price change: Up about 63%
- Dividend yield: 0.61%
With a market capitalization of about $2.3 trillion, the Cupertino, California-based Apple is currently the world’s most valuable company. Yet, despite the mammoth market cap, Apple still remains in growth mode. Its smart phones, mobile communication and media devices, personal computers and portable digital music players significant attract consumer interest worldwide.
If the potential offered by Bitcoin is enough to pique the interest of Elon Musk, the wealthiest person on earth, it might also do the trick for the world’s most valuable company. Apple currently has over $200 billion in cash, meaning it could easily allocate some of the savings to a new investment vehicle.
It is currently possible to buy BTC with Apple Pay. Bitcoin bulls might also argue that BTC could further accelerate Apple’s growing payments business. For instance, Apple could implement a cryptocurrency exchange within the Apple Wallet ecosystem, which is expected to becoming a leading top-line contributor.
The tech giant has over 1 billion active iPhones around the world. That metric would lead to a massive increase in BTC adoption globally, if Apple were to combine its security and technical know-how with user-friendliness so that the customer base could feel more confident about Bitcoin usage. The result could easily be increased revenue every quarters.
APPL stock is likely to create further shareholder value for many quarters. However, forward stock’s P/E and P/S ratios are 31.65 and 7.99, respectively, meaning high valuation levels. I believe shares priced below $130 would offer an improved margin of safety.
- 52-week range: $199.99 – $367.25
- 1-year price change: Up about 1.0%
- Dividend yield: 0.52%
Mastercard connects millions of consumers, financial institutions, and businesses worldwide, enabling them to use electronic forms of payment. Users can make payments by using its brands, which include MasterCard, Maestro and Cirrus.
The company reported fourth-quarter and full-year 2020 results in late January. Net revenue was $4.1 billion, down 7% from the prior year period. This decline was due to a significant decrease in cross-border volume, down 29% YoY. Management highlighted the decline in travel spending during the pandemic.
Net income was $1.8 billion, down 15% YoY. Diluted earnings per share was $1.78 per share, down 14% from $2.07 a year ago. Cash and equivalents stood at 12.4 billion at the end of 2020. The group generates revenue based on payment volume traffic in its network. Therefore, its profitability depends on businesses and consumers spending more.
“The cryptocurrency market continues to mature, and Mastercard is driving it forward, creating safe and secure experiences for consumers and businesses in today’s digital economy,” said Raj Dhamodharan, Mastercard’s executive vice president. “Our philosophy on cryptocurrencies is straightforward: It’s about choice. Mastercard isn’t here to recommend you start using cryptocurrencies. But we are here to enable customers, merchants and businesses to move digital value — traditional or crypto — however they want.”
In fact, Mastercard announced its plans to provide merchants the opportunity to receive payments in cryptocurrency later this year. This move seems to be a significant milestone for Bitcoin, as Mastercard would become a major platform for the digital asset.
When someone wants to buy an item with cryptocurrency, Mastercard’s crypto partners will convert the digital currency into traditional currency and transmit over its network. This change “will allow many more merchants to accept crypto” as well as “cut out inefficiencies, letting both consumers and merchants avoid having to convert back and forth between crypto and traditional to make purchases,” Mastercard said.
While the company endured YoY revenue and margin declines in the past year, I find MA stock’s prospects to be bright. The shares could act as a proxy for investing in the recovery in the U.S. and the world.
- 52-week range: $39.71 – $66.20
- 1-year price change: Up about 14%
- Dividend yield: 1.52%
Headquartered in Redwood City, California, Oracle provides hardware and software products and services for enterprise data management. Larry Ellison, co-founder of Oracle, is a supporter of blockchain technology. He is not shy to highlight that the technology embodies many uses in various fields. The company offers an Enterprise Blockchain platform for companies to streamline their intercompany reconciliations.
Rumors suggest Oracle might also be planning to make Bitcoin part of its operations. As Ellison is a board member of Tesla, investors question his involvement in the decision-making or even approval of Tesla’s recent $1.5 billion Bitcoin purchase.
The company announced fiscal 2021 second-quarter results on Dec. 10. Revenue was up 2% YoY to $9.8 billion. Non-GAAP net income was up 9% to $3.2 billion. Non-GAAP earnings per share increased 19% to $1.06. Operating cash flow was $14.0 billion over the past 12 months.
CEO Safra Catz cited, “Our highly profitable multi-billion dollar Fusion and NetSuite Cloud ERP applications businesses grew revenue 33% and 21%, respectively, in Q2. These two strategic cloud applications businesses are major contributors to Oracle’s increased operating earnings and consistent earnings per share growth.” Enterprise demand for the group’s cloud services has also remained resilient throughout pandemic.
ORCL stock’s forward P/E and P/S ratios are 13.59 and 5.04, respectively. Any decline below $60-level would offer a better entry point to the shares.
- 52-week range: $2.53 – $128.50
- 1-year price change: Up about 1,050%
- Dividend yield: 0.15%
Salt Lake City, Utah-based Overstock.com is an e-commerce company. Founded in 1999, it currently has three main segments:
- Retail — through its several websites, Overstock.com’s legacy business sells a range of household products as well as jewelry, electronics, and apparel, among others. Customers can pay for purchases with Bitcoin.
- tZERO Group (tZERO) — an alternative trading system (ATS) that is regulated by the Securities and Exchange Commission (SEC). tZero aims to become a platform for digitizing all sorts of asset classes. As a result, these digitized assets could trade via a secure digital ledger (i.e., blockchain). It is a subsidiary of Medici Ventures.
- Medici Ventures (MVI) — oversees Overstock.com investments in firms building solutions leveraging blockchain technologies.
The company is expected to release Q4 earnings on Feb 24. In Q3, revenue was $732 million, up 111% YoY. Net income of $23 million translated into diluted earnings per share of 50 cents, an improvement of $1.39 year over year. Cash and equivalents stood at $530 million.
CEO Jonathan Johnson said, “tZERO received FINRA approval to provide retail brokerage services for digital securities through its subsidiary, tZERO Markets, which officially launched last week. Several of our Medici Ventures companies are raising capital, most are getting products into production, and many are generating revenue.”
The Street believes Overstock.com is moving away from being an online retailer and to a blockchain and cryptocurrency company. Further top-line growth might help the group to fund various blockchain-related ventures.
Over the past year, OSTK stock is up over 1,050% (no, that is not a misprint). A potential decline toward the $90-level would offer a better entry point.
Silvergate Capital (SI)
- 52-week range: $2.53 – $128.50
- 1-year price change: Up about 980%
Our next company is a financial institution, namely the California-headquartered Silvergate Capital that went public in November 2019. It is the holding company for Silvergate Bank, a provider of solutions for the digital currency industry.
Silvergate Capital offers services in commercial banking, business lending, and real estate mortgage solutions. In addition, it operates the Silvergate Exchange Network (SEN), a network of digital currency exchanges and digital currency investors.
In late January, the company released fourth-quarter results. Net income was $9.1 million, or 47 cents per diluted share. The previous quarter, the numbers that been net income of $7.1 million, or 37 cents per diluted share. A year ago in Q4, net income of $3.6 million had translated into 19 cents per diluted share.
Investors were pleased to hear SEN handled 90,763 transactions in the fourth-quarter of 2020. This was “an increase of 33%, compared to 68,361 transactions in the third quarter of 2020, and an increase of 530% compared to 14,400 transactions in the fourth quarter of 2019.”
Furthermore, its “Digital currency deposits grew by $2.9 billion to $5.0 billion as of December 31, 2020, compared to $2.1 billion as of September 30, 2020.”
CEO Alan Lane said, “Looking ahead to 2021, I am extremely excited about the multiple paths to continued growth and opportunities to monetize the SEN platform, such as digital asset lending and custodial services.”
Like Overstock.com, Silvergate has been moving away from its core commercial banking business to serving the cryptocurrency community. The spectacular rise in SI shares started in October 2020, when the stock was about $15. Now, it is hovering at $175. I believe a potential decline toward the $150-level would offer a better margin of safety.
- 52-week range: $32.33 – $273.84
- 1-year price change: Up about 23o%
Financial technology (fintech) darling Square is led by Twitter’s (NYSE:TWTR) co-founder and CEO Jack Dorsey. Its ecosystem enables transactions between merchants and their clients. Its services include financial and merchant services, a mobile payments platform, as well as hardware such as point of sale (PoS) equipment. Through Square Capital, the business has also become a player in small business lending.
Square’s third-quarter results announced in early November were robust. Total revenue was $3.03 billion, up 140% YoY. Gross profit of $794 million represented a growth of 59% YoY. Net income was $36.5 million, up 24%. Adjusted net income per diluted share was 34 cents. A year ago, it had been 25 cents. The group ended the quarter with $3.8 billion in liquidity.
Management highlighted, “In our Seller ecosystem, gross profit was up 12% year over year during the third quarter. Our Cash App ecosystem delivered strong gross profit growth of 212% year over year. We remain focused on increasing daily utility for our Cash App customers to products beyond peer-to-peer payments, which helps drive higher engagement and monetization.”
Q3 results showed that its Bitcoin operations are increasingly becoming a key catalyst for the company. “Cash App generated $1.63 billion of bitcoin revenue and $32 million of bitcoin gross profit during the third quarter of 2020, up approximately 11x and 15x year over year, respectively. Bitcoin revenue and gross profit benefited from an increase in bitcoin actives and volume per customer. ”
In October 2020, Square bought $50 million in Bitcoin, and released its “Bitcoin Investment Whitepaper.” The key takeaway from the brief is that Square now believes it “is the right time for us to expand our largely USD-denominated balance sheet and make a meaningful investment in Bitcoin. We view bitcoin as an instrument of global economic empowerment.”
The company is expected to announce results in the coming days. Among other metrics, investors will want to see Square’s plans for Bitcoin. However, given the recent massive rally in SQ stock price, I believe most of the short-term growth has been factored into the current price. Long-term investors could consider buying the dips.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.