Coinbase continues to struggle in what's been a tumultuous year for digital assets. The largest publicly traded crypto exchange missed expectations even as cryptocurrency prices rebounded and stabilized following their September slump.
Coinbase stock plummeted 76% so far this year while major cryptocurrencies Bitcoin and Ethereum both fell 60%. Meanwhile, Coinbase's retail participation dropped nearly 70% in the second quarter.
In mid-October, Coinbase and automated payments company Primer announced a strategic integration to offer crypto payment options to merchants globally to help turn around its lower user trading volume.
However, Compass Point analyst Chase White tempered expectations for a major rebound in retail trading volumes. He lowered his full-year 2022 and 2023 estimates "significantly" in his pre-earnings research note at the end of October and slashed his price target for COIN stock to $75 from $95.
Still, institutional adoption is rising, which is a positive indicator for the overall crypto space.
Coinbase Earnings
Coinbase lost $4.98 per share in the second quarter while sales fell to $808 million. That's vs. $6.42 in earnings on $2.2 billion in revenue the year prior.
Expectations: Wall Street predicted losses of $2.38 per share compared to earnings of $1.62 last year. And saw revenue halving to $641 million.
Results: Coinbase reported a loss of $2.43 per share and revenue tumbled to $576.4 million.
The company's transaction revenue fell 66% to $365.9 million over the year, driven by a 66% drop in retail transaction revenue. Subscription service revenue, however, rose 44% to $210.5 million.
COIN Stock
COIN stock rose almost 5.5% to 58.82 by the end of Friday and jumped overnight after the report. Shares dropped roughly 8% to 55.80 during trading on Thursday, falling to the lowest level since late July.
COIN stock often moves with Bitcoin. Bitcoin rebounded back above $20,000 in late October. The digital currency has drifted slightly lower, but still holding that key level.
Coinbase stock came public in April 2021 via a direct offering. After hitting a record 429.54 in its first day of trading, COIN stock has trended lower, especially since November 2021.
A Coinbase Comeback?
There's still some bull cases for Coinbase. In mid-September, JPMorgan analyst Kenneth Worthington noted that Coinbase has a "substantial revenue opportunity" from rising interest rates. The revenue opportunity for Coinbase greater than other financial institutions, due to "unique investments and idiosyncrasies with crypto accounts," he wrote. Coinbase could keep nearly all of its interest income, unlike some of its other peers that pass it on to clients, Worthington predicted.
The biggest interest opportunity may stem from the stablecoin venture with Circle, which oversees the USDC stablecoin. Worthington estimates it could represent a $700 million opportunity of the potential $1.2 billion interest income revenue for Coinabse in 2023.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
