Block earnings: ‘Some species survived the Ice Age, I don’t expect that for crypto,’ analyst says

Mizuho Senior Financial Technology Analyst Dan Dolev discusses Block's latest earnings report and the cryptocurrency market.

Video Transcript

- Block shares are moving higher up 3 and 1/2% in after hours, after reporting fourth quarter fiscal earnings. Joining us now for a deep dive on what we saw from Block is Dan Dolev Mizuho Americas senior financial technology analyst. Dan, what was your biggest takeaway from these earnings?

DAN DOLEV: Hey, good evening from Jerusalem tonight. So I think the biggest thing, it was like an eh. It was uneventful, you know what I mean? Like, the results were just like, yes, they beat on EBITDA. They beat nicely on EBITDA, but everybody knew this. Like, you know, I hosted lunches, dinners with institutional investors over the last three months, and what I'm hearing everywhere is, yeah, they're going to beat on EBITDA. So what?

So they beat on EBITDA. But the most important KPIs which is the Cash App and point of sale seller, there were kind of like, eh, right? They sort of missed on seller. They kind of met on cash, that they actually missed on number.

I think it's kind of uneventful. I don't see anything that could get you really excited here and that's why you were seeing that muted stock reaction. It's not like really ripping. And so it's not really it's--

- Hey, Dan-- Dan, I think we-- I think we still have you. Your audio's cutting in, but-- cutting in and out. While we do have you and thanks for staying up late in Jerusalem with us. It's 11:45 PM there. When you think about what this means for how a company like Block and Cash App, quite frankly, can continue to engage with crypto, do you believe that that's something that they need to either wind back? How does that continue to impact them going forward considering the crypto Ice Age as I believe you've called it, when we talked about previously?

DAN DOLEV: Yeah, it's worse than an Ice Age. It's total annihilation. But the-- I think some species survived the Ice Age. I don't expect that for crypto. I'm so bearish. I think Bitcoin has been a huge problem for Square or Block. I think the overfocus on Bitcoin has been dragged on the story, and what you're seeing now is actually a pivot. And you're not seeing them talk that much about Bitcoin. If you go back to their analyst day last year, it was all about Bitcoin.

So I think they're kind of like trying to fix the mistakes of the past. At the end of the day, they're not going to be-- Bitcoin or crypto could just be a drag on them. It's not a benefit. It almost has no impact on results, so it just hurts the story. So I think it's just-- it's kind of like almost a non-event for them, and they probably regret focusing that much on Bitcoin and crypto last year.

- Dan, talking a little bit about Cash App and the consumer, and the consumer that depending on who you talk to is getting squeezed, so to speak. The Cash App, the mobile wallet, does this give us an idea of how the consumer is doing? And I also want to tie-in Affirm which recently reported its quarterly results, and I know that you cover Affirm firm as well, the buy now pay later company. So tell us a little bit about what you gleam about the consumer and these apps, these payment companies, and what they've reported so far.

DAN DOLEV: Yeah, let me give you some numbers. It's actually a really good question that you're asking. So thank you for asking that. The inflows, 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 the people that tend to use the Cash App, they're more on the lower income side.

So you're really getting a sense of where they are in terms of the macro, and the inflows were I think 1,048 per user in the quarter, and this is up $2 from 1,046 in the last quarter. It's very, very flattish, right? You're not really seeing them-- their ability to actually get more people to bring in more dollars into the Cash App and I think that's the problem.

So it's the problem is their consumer is maybe still not in a really bad shape, but the execution is probably not as good as it should be. And that's why you're seeing those inflows come down. So either the consumers are going elsewhere, or the consumer has actually gotten weaker. We don't know that yet. I mean, I'll see if there's something on the call that they might mention.

When it comes to Affirm, I see a very different thing. We actually track Affirm's delinquencies, and we just published a note yesterday. And what you're seeing is the delinquencies are actually coming down. So Affirm's underwriting is better than people think. And the people that use it are not as focused or not as sort of concentrated in a relatively bad macroeconomic cohort as the Cash App is. So that's why 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 goodness, you were up at 11:45 PM Eastern. The call hasn't even started yet, and you're going to be tuning in to that as well to hear what the executive team has to say. Dan.

DAN DOLEV: There is-- thank you. There's nothing I wouldn't do for you guys, 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.