Coinbase Stock Takes A Knock As Revenue Falls

On Feb 24, 2023

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Coinbase (COIN) reported fourth-quarter sales earnings of $605 million. This is a 5% increase from the third quarter’s $590 million. The earnings exceeded analyst expectations of $588 million.

Their normalized loss of $2.46 for every unit for the quarter outperformed FactSet’s forecast of a loss of $2.52 per share.

Nevertheless, due to reduced overall trading volume, its transaction volume dropped by 12% from one quarter to the next to $322 million.

In Tuesday’s after-hours trading, shares of Coinbase increased by around 0.9% to $62.60.

Coinbase shares have increased tremendously in 2023 thus far, up 78%, along with the price of bitcoin, yet they’re nevertheless down 67% year-over-year. A focal area for the corporation, subscription and service sales increased 34% quarter by quarter, reaching $283 million in Q4.

About half of the total revenue in Q4 came from subscriptions and services, mostly as a result of interest income, which totaled $162.2 million.

According to a letter to shareholders from Coinbase, the crypto markets have strengthened so far in Q1 relative to Q4, which will enable the business to earn $120 million in processing profit in Jan 2023.

However, due to the volatility of the market demonstrated last year, the company cautioned shareholders against making generalizations about the earnings going forward.

The business added that it anticipates profiting from further regulation of cryptocurrencies in the upcoming year, both domestically and internationally.

It mentioned other countries, such as Brazil, the United Kingdom, and India. These countries have produced precise and clear legislation for regulating cryptocurrency. They are cited as examples of progress in the field. The European Union concluded the MiCA regulatory framework, which is for regulating cryptocurrency in the European Union.

Although it noted that it was still striving towards more uniform and open regulation, it chastised the US for its “disjointed strategy” to regulating cryptocurrencies.

On a revenue call with investors, Coinbase Founder Brian Armstrong stated that “policy is my top goal this year” and mentioned that he has been spending heavy hours in Washington, D.C.

The prospect of this innovation is generating a lot of interest, and many people want to see it developed in America. Expectations on the street are $586.2 million.

In the final quarter, the business generated net sales of $605 million, an increase of 5% over the previous quarter. The fourth quarter’s transaction earnings were $322 million, a 12% quarter-over-quarter decrease.

Revenue from subscriptions and services increased 34% quarter over quarter to $283 million during the fourth quarter of the year.

Coinbase Q4 Earnings and Revenue Exceeded Statistics

In the final quarter, Coinbase posted a decline of $2.46 per share, missing the Street’s forecast of a deficit of $2.39 per share. Bitcoin (Crypto: BTC) accounted for 35% of Coinbase’s trade volume in the fourth quarter, as opposed to 31% in the third.

In the fourth quarter, Ethereum (CRYPTO: ETH) made up 33% of trade volume, remaining constant from q3. 2022 was a difficult year for the cryptocurrency markets as well as our transaction income.

The market capitalization of cryptocurrencies fell with large-cap stocks as macroeconomic indicators such as inflation stayed high as well as interest rates increased throughout the year.

The business admitted that a significant factor in the reduction of the global capitalization of cryptocurrencies in the fiscal year was the bankruptcy as well as the collapse of Three Arrows Capital, Celsius, Voyager, and FTX.

Coinbase reported a net income of $3.15 billion for the entire year. In 2022, the company’s trade volume will be $830 billion.

Compared to 24% the year before, bitcoin accounted for 29% of the total trading volume. In comparison to 21% the year before, Ethereum accounted for 25% of trade volume overall.

A considerable increase from the $50 million recorded in 2020, subscription, as well as service revenue,

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reached $793 million in the entire fiscal year, well above the corporate projection of $700 million.

According to Coinbase, the 100 biggest hedge funds by assets within administration use Coinbase to a degree of about 25%.

What’s the future of Coinbase?

The business expects subscription and service revenue for the first quarter to be in the $300 million — $325 million range. The corporation said that its goals for 2023 include improving full-year adjusted EBITDA and cost control. “Crypto continues to be volatile, as well as our limited capacity to anticipate our transaction income, which remains connected with crypto capitalization and the volatility of crypto assets.”

In January 2023, according to Coinbase, it generated $120 million in processing income.

Cryptocurrency Regulations and Coinbase Stocks

In its letter to shareholders, the business provided an update on the state of regulation in the cryptocurrency industry.

“Regulation is on the way, and we think we’ll profit,” The business reaffirmed its commitment to collaborating with international authorities and decision-makers on the regulation of the cryptocurrency industry.

“Neither do we act as a market maker who trades against our consumers, nor do we issue exchange tokens,” the statement reads. In contrast to rivals, Coinbase asserted that it would benefit from more regulation.

“We are glad of our capacity for action and of our company’s positioning as a reputable and lawful industry leader. Although the road ahead may be difficult, our tenacity, resolution, and grit have been robust for a while, and we are optimistic about the future.

Wrapping Up

In Tuesday’s after-hours trade, Coinbase shares dropped 2% to $61.01. During the previous 52 weeks, shares have fluctuated between $31.55 and $206.79.

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