Tigress Financial Partners CIO Ivan Feinseth examines Block’s Q1 earnings miss, its Cash App revenues and guidance, consumer spending habits, and its merchant-based services.
SEANA SMITH: We want to dig into these earnings. And for that, we want to bring in Ivan Feinseth. He’s Tigress Financial Partners Chief Investment Officer. And, Ivan, when you take a look at the reaction, like Emily was just pointing to, it’s actually moving to the upside, maybe catching some investors by surprise. What did you think of this result?
IVAN FEINSETH: Overall, the fact that it’s trading up in the post market after announcing results is positive. The better guidance is positive. The weakness in Bitcoin revenue is not really that disappointing. Most Bitcoin revenue is related to people buying it as a storehouse of value. It’s not yet been adopted as a medium of exchange.
So it’s understandable that kind of the bubble bursting on Bitcoin has led to reduced people trying to own Bitcoin at this time. It’s still about their underlying business model, going beyond the payment, offering more integrated business management services, as well as the only thing that really was disappointing– maybe Cash App was a little bit lower than expected.
But overall, I think the results are good and Block continues to be part of my overall secular shift to electronic payment themes. And it’s one of the companies that, in my view, is a must-own along with companies like Mastercard and FiServ.
RACHELLE AKUFFO: Block obviously has this ecosystem that’s really driving this. And we saw that was what helped with the Q4 results. What are you seeing in terms of both the strength and the headwinds as you look at what’s within that ecosystem?
IVAN FEINSETH: Well, the strength is growing that ecosystem, both by users and further penetrating those users with additional services. And the headwinds, you know, it is a competitive space. And there are a lot of moving parts. And, unfortunately, we are in an economic environment and a geopolitical environment that it just constantly is disrupting things.
So the fact that their business model is moving forward, and their guidance, and the results overall were good, and their guidance remains good, I’m very positive on the stock. And certainly the sell-off that we’ve seen in the payment space, and this stock particularly, to me has created a tremendous buying opportunity at the current level.
SEANA SMITH: Well, Ivan, it’s interesting– you mentioned some of the layers that have been added to Block, the company, through their most recent acquisitions. One of the ones that you highlighted was a buy now pay later function here with Afterpay. How big of an opportunity is this for Block in the near-term?
IVAN FEINSETH: It’s a big opportunity for everyone. It’s becoming an option of choice. And in fact, when consumers don’t see that option, they tend to back away. So whether it’s on a website giving you the choice of spreading out the payments or even at the point of sale on a payment terminal, it is very important to consumers to be flexible.
So even though we’re in a very good economy, the consumer is very flush, strong employment, all the underlying things that help consumer spending, the only thing that’s been a little bit negative is consumer confidence. So the ability to spread out payments probably is a very good option. It’s being adopted. It’s growing everywhere. So I think it is an important part. I also like the purchase of Tidal. And I’ve liked a lot of the acquisitions that they made to continue to build this system to go what I call beyond the payment, and circle a business, and circle their users.
RACHELLE AKUFFO: Now, Tidal was one that stood out to me. How do you see that playing into their broader business? Where do you see that connection going?
IVAN FEINSETH: Well, I think the concept is to do– remember that Square really was built on providing the micro-merchant, if you will, the ability to take credit cards. And I think they will do with Tidal– that with Tidal, giving the ability of emerging artists to create a following a fan base and a payment stream for their art, which up until now has been very difficult. But now, given YouTube or things like Patreon and Tidal, it creates a revenue opportunity for emerging artists, which I think is important that we encourage all types of art, especially, to me, music.
SEANA SMITH: Ivan, talking about how Block compares to some of its competitors out there– because year-to-date, Block– and we know there’s a lot of upside opportunity, like you were saying– but year-to-date, Block is off just around 40%, certainly has not been an easy couple of months for most of the names in this space. But how do you think Square stacks up to some of those competitors?
IVAN FEINSETH: I think really with the addition of a lot of different business management services, payroll management, employee scheduling, especially in restaurants and retail, which tends to use both those– business lines use a lot of part-time workers– so the ability to manage and schedule that, pay those people, and pretty much manage those types of businesses I think is a very powerful attribute for the company and a big growth driver and what is, really, the big driver of expanding their ecosystem with their merchant base.
RACHELLE AKUFFO: And I want to ask you about Amazon, because, obviously, they announced plans to have the sort of direct from third-party sellers to consumers model that they’re launching in a beta process first, but more broadly later on. How do you see that, perhaps, eating into some of Square’s business?
IVAN FEINSETH: I’m not really sure in the sense that a lot of what Square’s business is is based on service providers, even restaurants, food service. But a lot of their business, their customer or their merchant base is more service providers. But we’ll have to see. I mean, Amazon goes into a lot of different businesses and they do things well.
They take their capacity and their ability to help companies manage delivery, manage logistics, manage sales. So Amazon’s a formidable competitor in everything. But a lot of times when you have certain business space growth, it tends to grow that business still for everybody. So we’ll have to just wait and see what happens there. But I think the one benefit that Block has overall is that their merchant base is primarily service providers.
SEANA SMITH: Block shares up just around 1% here after hours. Ivan Feinseth, the Tigress Financial Partners Chief Investment Officer, always great to get your perspective.