Coinbase to Report Strong Earnings, ETF Benefits May Surprise Wall Street, Analysts Say

Crypto
exchange
Coinbase
(COIN)
is
expected
to
report
stronger
earnings
and
revenue
when
it
reports
its
fourth-quarter
results
on
Thursday
due
to
increased
trading
volume
as
the
broader
market
rallied
during
the
quarter.

“We
expect
Q4
to
be
a
strong
quarter
for
the
company
as
volumes
returned
to
the
space
and
interest
income
held
up,”
said
investment
bank
Needham’s
analyst
John
Todaro,
who
has
a
buy
rating
on
the
stock.

The
higher
trading
volume
won’t
likely
be
a
surprise
as
the
digital
currency
market
saw
a
recovery
in
prices
during
the
fourth
quarter,
buoyed
by
spot
bitcoin

(BTC)
exchange-traded
funds
(ETFs)
getting
approved
to
trade
in
the
U.S.

The
trend
is
already
apparent
from
Coinbase’s
trading
platform
peer
Robinhood’s
earnings,
which

reported
a
10%
increase
in
crypto
revenue
in
the
fourth
quarter.
Traders
could
see
a
similar
result
for
Coinbase,
which
generates
most
of
its
revenue
from
trading
fees.

Compass
Point’s
Chase
White,
who
has
a
buy
rating
and
expects
$895
million
in
revenue
with
a
$200
price
target
for
2024,
said:
“We
expect
Q4
to
be
the
strongest
in
terms
of
revenue
and
adjusted
EBITDA
since
the
first
quarter
of
2022.”

FactSet
consensus
estimates
predict
Coinbase’s
revenue
to
have
increased
to
$826.1
million
from

$674.1
million
in
the
previous
quarter.
Trading
volume
is
also
expected
to
be
higher
at
$142.7
billion
versus
$76
billion
in
the
third
quarter.
The
analysts
expect
the
exchange
to
report
fourth-quarter
earnings
per
share
of
$0.02,
compared
to
a
loss
of
$0.01
per
share
in
the
previous
quarter.

However,
despite
expecting
more
robust
fourth-quarter
numbers,
analysts
are
voicing
mixed
opinions
about
the
benefits
of
Coinbase’s
strong
involvement
in
the
spot
bitcoin
ETFs.

One
analyst
noted
that
the
company’s
custodial
service
for
eight
of
the
ten
spot
bitcoin
exchange-traded
funds
(ETFs)
could
be
negative
for
the
crypto
exchange
in
the
future.

“The
big
hope
for
Coinbase
heading
into
2024
was
that
more
Bitcoin
ETF
AUM
would
drive
increased
spot
trading,”
Mizuho
analyst
Dan
Dolev,
who
has
an
underweight
rating
and
predicts
revenue
to
come
in
at
$944
million
with
a
$60
price
target
for
2024,
wrote
in
a
note.

He
points
out
that
outflows
from
ETFs
–
driven
by
Grayscale’s
Bitcoin
Trust
(GBTC)
–
outpaced
the
inflows
for
the
funds
that
Coinbase
provides
custodial
services
for,
dragging
down
Coinbase’s
ETF-related
assets
under
management
(AUM).
In
addition,
spot
volumes
on
the
exchange
have
slowed
after
the
initial
excitement
surrounding
the
ETF
launch,
Dolev
said.

On
the
other
hand,
Devin
Ryan,
Director
of
Financial
Technology
Research
at
Citizens
JMP,
said
the
ETFs
have
a
bigger
impact
than
many
appreciate
as
they
are
driving
more
interest
in
the
space
and
extend
well
beyond
the
price
of
bitcoin.

Needham’s
John
Todaro
shares
that
take,
saying
that
despite
the
launch
of
the
bitcoin
ETFs,
he
does
not
see
Coinbase
lowering
trading
fees
on
the
exchange.
“Their
market
share
is
more
protected
than
many
on
Wall
Street
think,”
he
said.

Ryan
also
noted
that
Coinbase’s
recently
launched
offshore
derivatives
exchange
is
bringing
in
significant
volume,
which
is
a
big
deal.
“This
matters
because
the
derivatives
market
is
much
larger
than
the
spot
market
currently,
so
the
potential
here
is
significant.”

He
noted
traders
should
look
for
guidance
on
expenses,
which
will
be
an
important
metric
going
forward
as
the
company
continues
to
invest.

The
shares
of
the
crypto
exchange
rose
about
13%
on
Thursday,
while
most
crypto-linked
stocks
rallied
as
bitcoin
price
climbed
past
$51,000.