Coinbase Earnings Pain Likely as Retail Activity Slumps, Wall Street Analysts Warn
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The clock is ticking for Coinbase as Wall Street analysts foresee a bumpy ride ahead for the crypto exchange giant. A gloomy outlook prevails as retail trading activity wanes, potentially leading to disappointing earnings results.
Experts from Barclays, JPMorgan, Compass Point, and Oppenheimer have all revised their first-quarter forecasts downward due to a decline in crypto trading. The anticipated drop in earnings per share (EPS) from $2.26 to $1.93 and revenue from $2.27 billion to $2.1 billion is worrisome compared to the previous quarter's figures of EPS at $4.40 and revenue of $1.2 billion.
Analysts are particularly concerned about the impact of reduced retail trading on Coinbase's profitability, with transaction revenue expected to suffer significantly. While some stability is expected from institutional trading and stablecoins, overall margins are under strain amid fragile retail trends.
Coinbase Earnings Pain Likely as Retail Activity Slumps, Wall Street Analysts Warn
Barclays, JPMorgan, Compass Point and Oppenheimer all cut their first-quarter forecasts last month, citing weaker crypto trading.
- Coinbase may miss Wall Street consensus earnings estimates due to a sharp slowdown in retail crypto trading activity, some analysts said.
- Subscription revenue from USDC interest and blockchain staking is expected to remain within guidance and partially cushion weaker transaction revenue.
- While institutional trading and stablecoins provided some support, analysts warn that margins are likely under pressure and retail trends remain fragile heading into the second quarter.
The looming earnings report holds uncertainty for Coinbase shareholders as expectations are dampened by lower trading volumes projected around $403.8 billion, down from the previous quarter's $439 billion.
J.P. Morgan highlights a challenging quarter with decreased trading volume across the industry but remains cautiously optimistic about controlled expenses and subscription revenue supporting adjusted EPS of $2.39.
Barclays and Compass Point paint a grimmer picture, emphasizing a cooling market since January despite stablecoin growth leading to diminished retail volumes below market estimates.
Despite these challenges, hope still flickers in the realm of stablecoins as Oppenheimer notes Coinbase's U.S. spot trading market share increase, albeit against a backdrop of cautious retail traders hesitating to re-enter the market post losses.
As second-quarter uncertainties loom large, analysts foresee a sluggish recovery in trading activities while keeping an eye on Coinbase shares which have dipped 23% year-to-date, currently valued at $198.06 with bitcoin showing modest gains at 3.8% since the start of the year at $97,023.
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Popular trading platform Robinhood, last week, reported a 13% drop in transaction-based revenue from the fourth quarter as markets cooled in the first three months of the year.
Stablecoins to the rescue?
The one area of optimism: stablecoins.
Oppenheimer cut its volume forecast to $380 billion from $440 billion, but noted that Coinbase gained U.S. spot trading market share. That’s a positive sign, but one that may not matter if retail traders keep sitting on their hands.
Looking ahead, analysts caution that a near-term rebound in trading may be slow to materialize, especially with retail traders often hesitant to re-enter the market until they recoup earlier losses.
Shares of Coinbase are down 23% year-to-date, trading at $198.06, while bitcoin is up 3.8% since the beginning of the year at $97,023.
