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Cryptocurrency exchange platform Coinbase Global posted an earnings report on Thursday night which beat analysts’ expectations and showed a huge rise in revenues year on year, but the share price initially dropped overnight in pre-market trading and moved five per cent lower soon after opening on Friday.
The Nasdaq-listed company has seen its share price rise 50 per cent over the past six months, sitting at $298 (£236) at the close of play before announcing their latest financial update.
But it has been a typically wild ride over the last five years, as has been the case with many products or platforms associated with bitcoin and cryptocurrency: from a price of $328 in October 2021, Coinbase shares crashed to well below $40 at the start of 2023. Since the final months of that year though they have again been – generally, with more than a few wild swings – on the rise again and topped $330 by December 2024.
Much of that can be explained in part of the business model. Plunging prices of bitcoin and cryptoassets resulted in lower fees per transaction for Coinbase, while fewer transactions overall also impacted. In addition, there have long been regulatory concerns as well as litigation cases to contend with.
With more adoption of cryptocurrencies in the mainstream financial arena, plus growing public (and political) awareness, plus President Donald Trump declaring he wants America to be the world’s “crypto capital”, trading has once again been on the increase.
Coinbase’s earnings report showed an earnings per share (EPS) of $4.68 for the three months to 31 December, with analysts having been expecting a profit of $1.81 per share, according to Reuters.
Transaction revenue rose 172 per cent to $1.6bn, with total revenue up to $2.3bn, having been $953.8m a year earlier. Clearly this is huge growth on a year on year capacity, but as ever the question for the platform – and for businesses experiencing growth in general – is whether it is sustainable, and what comes next.
So what are analysts and experts saying about it now? The share price dropped more than four cent in pre-market trading, but by noon GMT – still more than two hours ahead of the US markets opening – it was back up to just 1.7 per cent lower than Thursday’s close. That day itself saw shares surge more than eight per cent higher, in anticipation of the results update, yet on Friday within five minutes after the markets opened, the price was down and moving between two and five per cent lower again. Volatility, indeed.
Analysts’ view
Analysts who cover the company are split on the target share price – usually a 12-month or end-of-year indicator of expectations, but frequently subject to change – but across the board at least 24 of 26 rate the stock as a strong buy, buy or hold, per Yahoo Finance’s latest data.
Citi maintain a buy rating on Global, citing a target price of $350, with Benzinga listing share price targets ranging from £328 (Barclays) to $420 (Needham).
The lowest on their list was analyst Kyle Voight at Keefe, Bruyette and Woods, who offers a “market perform” rating – in other words, an expectation that shares rise or fall in line with the wider market – and a price of $275.
Jefferies analyst Trevor Williams told Yahoo Finance that higher marketing spend would drive down profit margins and has a hold rating on the stock, while JP Morgan analyst Ken Worthington said the trading volumes surge “seen post election have largely remained intact, suggesting that this level of velocity, activity and revenue generation levels could be sustainable.”
Dan Coatsworth, investment analyst at AJ Bell, told The Independent: “The buzz around how Donald Trump would become the first US president to embrace cryptocurrencies with open arms caused a frenzy among the public who were eager to grab a slice of Bitcoin. It created the perfect environment for Coinbase as a flood of people used the platform to buy and sell cryptos. This tailwind helped the business to beat earnings expectations for the first time in three quarters.
“What’s really impressive is the scale of the ‘beat’. The market had forecast $1.36 earnings per share and Coinbase achieved more than three times that amount at $4.68. It’s incredibly rare to see a company smash forecasts on that grand a scale.
“The big question for investors is whether that winning streak is now over. The stock market is forward looking and investors care about what’s coming next, not what’s just been reported. The fact Coinbase’s shares fell in pre-market trading is telling – it implies that the market sees the latest quarterly success as a firework that’s lit up the skies but quickly disappeared.
“The next quarter is forecast to generate $1.28 earnings per share, less than what was forecast for the quarter just gone. The crypto market is driven by pure speculation and when things go quiet on the news front regarding major buyers or sellers, or what might happen from a political or regulatory perspective, the volume of trading inevitably dies down.”
Coinbase intent
Naturally, Coinbase themselves are bullish on future prospects.
“We’re really entering a golden age for crypto here. The opportunity in front of us is unprecedented to update the financial system and increase economic freedom around the world, the regulatory overhang is lifting,” CEO Brian Armstrong said on a post-earnings call.
“President Trump is moving fast to fulfill his promise of making US the crypto capital of the planet. And the most pro-crypto Congress we’ve ever seen is now leading the charge on stablecoin and market structure legislation. Given the US’s leadership here, the rest of the world is taking notice and will be under pressure to embrace crypto adoption,” he added.
Coinbase want market additions from the presidential administration to revolve around token classification and stablecoins, while there’s an expectation they’ll also look to gain a bigger share of institutional investors’ business in crypto as time goes on.
Potential headwinds and tailwinds
TradingView note that retail investors have not returned to buying and selling cryptocurrency to the same levels as seen in 2021. That means there’s scope for more – but also probably shows more people are aware of the tax implications of bitcoin and beyond now, which was not perhaps the case earlier on.
International expansion is another potential case, but just as regulatory pressures may now decrease Stateside, they may still face big issues in other countries where governance is not as pro-crypto or where retail investors are more restricted in how they can trade.
Additionally, Coinbase has a low rate of return on equity (0.88 per cent), Benzinga shows, with their net margin (6.26 per cent) also below industry averages and meaning cost cutting may be on the agenda. All this, before considering potential competitors to the platform such as Robinhood, which itself reported record revenue this week.
Whatever way the Coinbase share price goes, it’s possible that cryptocurrency itself continues to be volatile, unpredictable and a source of argument between those who believe it to be a huge part of the future, and those who see it as having little or no intrinsic value.
