Coinbase Global
handily beat analysts’ estimates of earnings and revenue for the fourth quarter, sending the stock up about 11% in after-hours trading.
Coinbase
after the close on Thursday reported $1.04 in earnings per share, based on generally accepted accounting principles, on nearly $954 million in revenue. Those numbers compared with analysts’ estimates of a two-cent per-share gain and $826 million in sales, according to FactSet.
In the fourth quarter of 2022, when the crypto markets were still quaking in the aftermath of the failure of Sam Bankman-Fried’s FTX, the company lost $2.46 per share from $629 million in revenue.
The results were bolstered by a rebounding crypto market that’s continued its momentum in the first quarter. Bitcoin on Thursday traded near $52,000, up 113% from a year earlier, bringing its total market value above $1 trillion. Though Coinbase stock has fallen about 4.6% so far this year through Thursday’s close, it has still climbed about 150% in the last 12 months.
Some analysts have said that increasing competition from firms including
Robinhood Markets
and Fidelity could force Coinbase to lower its trading fees or cede market share. That hasn’t happened, said Coinbase Vice President of Investor Relations Anil Gupta in an interview.
“Candidly I think the worries about fee compression have been happening for years, and we haven’t seen it,” said Gupta, citing figures showing Coinbase’s spot trading volume growing more quickly than that of the market as a whole.
Trading volume on Coinbase more than doubled to $154 billion between the third and fourth quarters of last year. That reflected $29 billion in volume from retail traders and $125 billion from institutions, which are especially active during periods of high crypto volatility. That beat analysts’ estimates on overall volume of $142.7 billion.
While Bitcoin and Ether made up the bulk of transaction volume at about 46% combined, they lost trading share to so-called alternative tokens, whose share shot up 14 percentage points to 42%. Transaction revenue in crypto assets not named Bitcoin or Ether accounted for more than half of Coinbase’s transaction revenues in the fourth quarter.
On Thursday before the earnings report, J.P. Morgan analysts upgraded Coinbase stock to Neutral from Underweight, citing rising prices of Bitcoin and other tokens, as well as inflows of money into Bitcoin exchange-traded funds. They maintained an $80 price target.
“We see the higher cryptocurrency prices not only sustaining, but improving, activity levels and Coinbase’s earnings power as we look to 1Q24,” the analysts wrote.
The 2023 fourth quarter was marked by increasing confidence that the Securities and Exchange Commission would soon approve Bitcoin ETFs, which finally came to pass in January. Investors believe the new funds will bring some institutions and financial advisors into crypto for the first time, and the funds have already gathered billions of dollars in assets.
Coinbase custodies Bitcoin for most of the new funds, for which it is paid fees. But the ETFs also present potential challenges for the company, since many investors will find them less costly than buying Bitcoin through the trading platform directly. Coinbase CEO Brian Armstrong has said he believes the ETFs are a net positive for the company, since it will set many investors on the path of engaging with other aspects of crypto beyond Bitcoin, for which the company can provide services.
Coinbase also still faces a regulatory overhang. The SEC is suing Coinbase for allegedly operating as an unregistered securities exchange, a charge that the company is fighting. A judge heard arguments from the SEC and the company last month and will rule in the coming weeks on whether a trial is needed.
Write to Joe Light at [email protected]
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