“Some species survived the ice age, I don’t expect that for crypto,” says analyst
Mizuho Senior Financial Technology Analyst Dan Dolev discusses Block’s latest earnings report and the cryptocurrency market.
Video transcription
– Block stocks move higher 3 and 1/2% after the fact, after reporting fourth quarter financial earnings. Joining us now for a deep dive into what we saw from Block is Dan Dolev, Mizuho Americas Senior Financial Technology Analyst. Dan, what was your biggest gain from these earnings?
DAN DOLEV: Hello, good evening from Jerusalem tonight. So I think the biggest thing, it was like a uh. It was uneventful, you know what I mean? Like, the results were just like, yeah, they hit EBITDA. They beat EBITDA well, but everyone knew this. Like, you know, I’ve been having lunches, dinners with institutional investors for the last three months, and what I’m hearing everywhere is, yeah, they’re going to hit EBITDA. So what?
So they turned on EBITDA. But the most important KPIs, which are the Cash app and the point-of-sale seller, kind of existed, right? They kind of missed the seller. They kind of met on cash, which they actually missed number.
I think it’s a bit uneventful. I don’t see anything to get you very excited here, which is why you saw the muted stock reaction. It’s not like really ripping. And then it’s not really that’s–
– Hey, Dan– Dan, I think we– I think we still have you. Your sound cuts in, but — cuts in and out. While we have you, and thanks for staying up late in Jerusalem with us. It is 23:45 there. When you think about what this means for how a company like Block and Cash App can, quite frankly, continue to engage with crypto, do you think that’s something they either need to pull back? How does that continue to affect them going forward in terms of the crypto ice age as I think you called it, when we were talking about earlier?
DAN DOLEV: Yes, it’s worse than an ice age. It is total annihilation. But I think some species survived the Ice Age. I don’t expect that for crypto. I am so bearish. I think Bitcoin has been a big problem for Square or Block. I think the over focus on Bitcoin has been dragged into history and what you are seeing now is actually a pivot. And you don’t see them talking about Bitcoin that much. If you go back to their analyst day last year, it was all about Bitcoin.
So I think they are a bit like trying to fix the mistakes of the past. At the end of the day, they’re not going to be– Bitcoin or crypto may just be a knock on them. It is not an advantage. It has almost no impact on the results, so it just hurts the story. So I think it’s just– it’s almost like a non-event for them and they probably regret focusing so much on Bitcoin and crypto last year.
– Dan, talking a little bit about Cash App and the consumer, and the consumer who depending on who you talk to is being pushed, so to speak. The Cash app, the mobile wallet, does this give us an idea of how the consumer is feeling? And I also want to link to Affirm which recently reported its quarterly results and I know you also cover the Affirm buy now pay later company. So tell us a little bit about what you’re seeing about the consumer and these apps, these payment companies, and what they’ve reported so far.
DAN DOLEV: Yes, let me give you some numbers. That is actually a very good question you ask. So thanks for asking about it. The implications, right? Which is how much money comes into the Cash app, right? Which is– remember, it’s consumer, but it’s also a very in terms of the cohort or people who tend to use the Cash app, they’re more on the low-income side.
So you really get a sense of where they are relative to the macro and the inflows were I think 1048 per user in the quarter and this is up $2 from 1046 last quarter. It’s very, very flat, isn’t it? You don’t really see them – their ability to actually get more people to get more dollars into the Cash app, and I think that’s the problem.
So that’s the problem is that their consumer might still not be in really bad shape, but the execution probably isn’t as good as it should be. And that’s why you see those inflows going down. So either consumers are going elsewhere or the consumer has actually become weaker. We don’t know that yet. I mean, I’ll see if there’s anything on the call that they can mention.
As for Affirm, I see a completely different thing. We’re actually tracking Affirm’s default, and we just published a memo yesterday. And what you see is that the delay actually comes down. So Affirm’s underwriting is better than people think. And the people who use it are not as focused or not as concentrated in a relatively poor macroeconomic group as the Cash app is. So therefore, Affirm is better in many, many ways than Square.
– Dan, I’ll tell you what, for a person who has a neutral rating on Square, you must really love talking about Block because, my God, you were up at 11:45 PM Eastern. The conversation hasn’t even started yet, and you’ll be tuning in to hear what the executive team has to say, too. Dan.
DAN DOLEV: It’s… thanks. There is nothing I would not do for you, for Yahoo Finance.
– Dan, we appreciate it and the feeling is mutual. Mizuho Americas Senior Financial Technology Analyst, Dan Dolev. Appreciate the time as always.
