Coinbase Narrowly Misses Top and Bottom Lines
Coinbase became a public company just two months ago. The company’s first earnings report was not up to analysts’ expectations, dropping on both the revenue side and EPS (Earnings per Share) side. Following the announcement, stock in the company fell by more than three percent.
Although both profit and revenue figures are certainly impressive, especially for a new company, they are not expected to make a major impact on the market. Coinbase had released a preliminary analysis on April 6, just a few days before the launch of its shares.
Although the company missed expectations, the numbers are still strong. Revenue was forecasted to be $1.81 billion, it was actually $1.8 billion. Earnings per share were expected to be $3.09, EPS was actually $3.05.
In a statement, the company noted that Q1 results reflected the strength of the cryptocurrency price cycle, with many crypto assets hitting all-time highs during the quarter. Although prices were high, so was market volatility and increased interest in the entire crypto-economy.
Competition is Heating Up
The quarterly report noted that Coinbase has more than 56 million users, up considerably from 34 million a year earlier. Of the user base, over 8,000 were institutions and 134,000 are ecosystem partners.
Although the user base grew considerably, the company noted the potential of headwinds as completion in “crypto space” is heating up considerably. A spokesperson for Coinbase noted that completion is supporting crypto assets that the company does not currently support. It was also noted that competitors were also active in offering new products and services, not on offer by Coinbase. The company says it welcomes the competition.
Rival Exchange Being Investigated
Coinbase’s earnings report followed on the heels of news that Binance, a rival exchange, is under investigation by the IRS as well as the Justice Department. The investigation is related to potential tax offenses as well as money laundering, this according to Bloomberg.
When Coinbase went public in April, it did so at $381 per share. On the first day of trading, the company’s share price hit $429. Since that date, the marker has been trading down, having fallen by about 40 percent. Late last week Coinbase was trading at $276.46. Stock in the company serves as a vehicle for investors who wish to enter the cryptocurrency space without having to deal with the wild swings in price associated with the currency itself.
Pricing Changes on Full Display
Wild pricing changes have been very evident over the last 7 to 10 days. Dogecoin, which was on a roll in anticipation of last week’s episode of SN, is also falling. Before the TV debut of Elon Musk, Tesla CEO, prices were as high as 70 cents. After Musk suggested the crypto was a “hustle” while on air, the price of Dogecoin dropped by over 20 cents to less than half a dollar.
Musk was not satisfied with damaging Dogecoin, he did somewhat similar damage to Bitcoin. The price of the crypto fell by as much as 12 percent after Musk announced that his car company would no longer accept the crypto for the purchase of Tesla vehicles. To support his decision, Musk cited the dramatic consumption of energy needed to mine Bitcoin.
For the most part, Coinbase can largely avoid having to cope with the wild gyrations of crypto. This is thanks in part to the fact that it is an exchange for investors involved in trading crypto.
On May 10, research notes by the brokerage and investment firm Oppenheimer placed an outperform rating on Coinbase stock. It noted that the firm sees Coinbase (NASDAQ ticker COIN) as an enabler of innovation within the crypto industry. This fact tends to solve some of the “pain points” of the existing system.
Dan Dolev, an analyst with Mizuho America, raised some concerns that the reliance on commissions might pose a risk to Coinbase stock in the future as more and more competitors enter the space.
Dolev wrote, “There may be downward pressure on fees from competing platforms which are following in the footsteps of trading stock at zero-commission. He went on to say that platforms such as PayPal and Cash App are using crypto trading as tools of engagement.