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Should Coinbase (COIN) Be in Your Portfolio Post Q2 Earnings?
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Coinbase Global Inc. (COIN - Free Report) reported strong second-quarter results on Aug 1, wherein the top line beat the Zacks Consensus Estimate and the bottom line met the same, reflecting continued revenue diversification. Subscription and services revenues reached an all-time high. The second quarter also marked the sixth straight quarter of positive adjusted EBITDA.
Management expects third-quarter 2024 subscription and services revenues to be between $530 million and $600 million. However, this guidance takes into account a 3% decline in the average price of Ethereum in July, a September rate cut expectation and an increase in expenses related to USDC to drive its global adoption as the most compliant stablecoin.
A Sneak Peak Into Q2 Results
The top line more than doubled year over year to $1.45 billion, reflecting increases in transaction revenues (up 138.7% year over year), as well as subscription and services revenues (up 78.6%). Both Stablecoin revenues and Blockchain rewards, contributing majorly to the top line, improved dramatically.
Trading volume of $226 billion increased 145.6% year over year, attributable to a decline in the crypto market cap. Consumer trading volume increased 164.3% year over year, while institutional trading volume increased 142.3% year over year.
Total operating expenses increased 41.5% to $1.1 billion, attributable to a gain on crypto assets held for operations in the first quarter of 2024 combined with a loss on crypto assets held for operations in the second quarter. Transaction expenses increased 77%, driven by trading volume.
Adjusted EBITDA was $596 million, up more than threefold year over year. Earnings per share of $1.07 rebounded from the year-ago loss of 42 cents per share.
Growth Mirroring Success
COIN, America's largest registered crypto exchange, provides financial infrastructure and technology for the crypto economy in the United States and internationally. It is set to benefit from higher crypto asset volatility and crypto asset prices.
COIN is prioritizing crypto utility as it envisions bringing on 1 billion or more people on crypto rail and is thus heavily investing in infrastructure and foundational platforms. Layer 2s, like Base, enable one-second, one-cent global transactions, while Stablecoins, like USDC, enable global transfer and settlement in dollar terms and smart wallets that offer seamless onboarding. Smart wallets, improvements to Simple and Advanced trading and expansion of Coinbase Financial Market’s derivatives offering are some other initiatives that facilitate utility, speed, efficiency and ease of use. COIN partnered with Stripe to enhance the global adoption of crypto.
Also, increasing regulatory clarity serves as a vital unlock for Coinbase and the broader crypto economy.
Strengthening banking connections, locking of new licenses and expansion of tailor-made product ranges to meet unique customer preferences are aiding COIN in scaling new heights.
Coinbase is increasing its market share in the U.S. spot and derivatives markets, expanding its product portfolio and penetrating the international market. This apart, growth in stablecoins should fuel the top line of this company.
Price Performance
Shares of Coinbase have gained 125.8% year to date, outperforming the industry’s increase of 8.3%, the Finance sector’s rise of 9.5% and the Zacks S&P 500 composite’s increase of 15% in the said time frame. The outperformance is backed by product expansion, operational expertise and a solid crypto market.
COIN vs Industry, Sector, S&P 500
Image Source: Zacks Investment Research
Shares of Robinhood Markets (HOOD - Free Report) and Interactive Brokers Group, Inc. (IBKR - Free Report) , two other crypto-oriented stocks, have rallied 51.7% and 22.7%, respectively, in a year.
COIN Trading Below 50-Day Moving Average
Coinbase shares are trading below the 50-day moving average, indicating a bearish trend.
COIN Price Movement vs 50 Day Moving Average
Image Source: Zacks Investment Research
Estimate Revision Trend
Earnings estimates for Coinbase for 2024 have moved down 16% to $5.68 over the past seven days, while the same for 2025 have gone down by 21.5% to $2.63.
Image Source: Zacks Investment Research
Expensive Valuation
COIN is expensive currently. It is trading at a P/E multiple of 27.27, higher than the industry average of 21.05. However, given the growth prospect, rising estimates and better return on invested capital, a premium valuation is justified.
Image Source: Zacks Investment Research
To Conclude
The crypto market is highly volatile and the recent sell-off bears testimony to the same. While Bitcoin, the largest cryptocurrency, lost 7% on Aug 5, Ethereum, the second-largest cryptocurrency, lost 19.9% on the same day. Nonetheless, both have started gathering pace already.
SEC’s approval of Bitcoin spot exchange-traded funds, the halving of Bitcoin, the anticipated rate cut by the Fed in September and strategic moves to increase the adoption of Bitcoin together point toward rosy days ahead for Bitcoins, per a Motley Fool analyst.
COIN's efforts to accelerate growth in the crypto market, increase market share in spot trading on consumer and institutional trading platforms and improve trading experience along with continued innovation and cost-control initiatives make this Zacks Rank #3 (Hold) a safe heaven. Investors who own the stock should retain it, while others may wait for a better entry point, given its premium valuation.
Image: Shutterstock
Should Coinbase (COIN) Be in Your Portfolio Post Q2 Earnings?
Coinbase Global Inc. (COIN - Free Report) reported strong second-quarter results on Aug 1, wherein the top line beat the Zacks Consensus Estimate and the bottom line met the same, reflecting continued revenue diversification. Subscription and services revenues reached an all-time high. The second quarter also marked the sixth straight quarter of positive adjusted EBITDA.
Management expects third-quarter 2024 subscription and services revenues to be between $530 million and $600 million. However, this guidance takes into account a 3% decline in the average price of Ethereum in July, a September rate cut expectation and an increase in expenses related to USDC to drive its global adoption as the most compliant stablecoin.
A Sneak Peak Into Q2 Results
The top line more than doubled year over year to $1.45 billion, reflecting increases in transaction revenues (up 138.7% year over year), as well as subscription and services revenues (up 78.6%). Both Stablecoin revenues and Blockchain rewards, contributing majorly to the top line, improved dramatically.
Trading volume of $226 billion increased 145.6% year over year, attributable to a decline in the crypto market cap. Consumer trading volume increased 164.3% year over year, while institutional trading volume increased 142.3% year over year.
Total operating expenses increased 41.5% to $1.1 billion, attributable to a gain on crypto assets held for operations in the first quarter of 2024 combined with a loss on crypto assets held for operations in the second quarter. Transaction expenses increased 77%, driven by trading volume.
Adjusted EBITDA was $596 million, up more than threefold year over year. Earnings per share of $1.07 rebounded from the year-ago loss of 42 cents per share.
Growth Mirroring Success
COIN, America's largest registered crypto exchange, provides financial infrastructure and technology for the crypto economy in the United States and internationally. It is set to benefit from higher crypto asset volatility and crypto asset prices.
COIN is prioritizing crypto utility as it envisions bringing on 1 billion or more people on crypto rail and is thus heavily investing in infrastructure and foundational platforms. Layer 2s, like Base, enable one-second, one-cent global transactions, while Stablecoins, like USDC, enable global transfer and settlement in dollar terms and smart wallets that offer seamless onboarding. Smart wallets, improvements to Simple and Advanced trading and expansion of Coinbase Financial Market’s derivatives offering are some other initiatives that facilitate utility, speed, efficiency and ease of use. COIN partnered with Stripe to enhance the global adoption of crypto.
Also, increasing regulatory clarity serves as a vital unlock for Coinbase and the broader crypto economy.
Strengthening banking connections, locking of new licenses and expansion of tailor-made product ranges to meet unique customer preferences are aiding COIN in scaling new heights.
Coinbase is increasing its market share in the U.S. spot and derivatives markets, expanding its product portfolio and penetrating the international market. This apart, growth in stablecoins should fuel the top line of this company.
Price Performance
Shares of Coinbase have gained 125.8% year to date, outperforming the industry’s increase of 8.3%, the Finance sector’s rise of 9.5% and the Zacks S&P 500 composite’s increase of 15% in the said time frame. The outperformance is backed by product expansion, operational expertise and a solid crypto market.
COIN vs Industry, Sector, S&P 500
Image Source: Zacks Investment Research
Shares of Robinhood Markets (HOOD - Free Report) and Interactive Brokers Group, Inc. (IBKR - Free Report) , two other crypto-oriented stocks, have rallied 51.7% and 22.7%, respectively, in a year.
COIN Trading Below 50-Day Moving Average
Coinbase shares are trading below the 50-day moving average, indicating a bearish trend.
COIN Price Movement vs 50 Day Moving Average
Image Source: Zacks Investment Research
Estimate Revision Trend
Earnings estimates for Coinbase for 2024 have moved down 16% to $5.68 over the past seven days, while the same for 2025 have gone down by 21.5% to $2.63.
Image Source: Zacks Investment Research
Expensive Valuation
COIN is expensive currently. It is trading at a P/E multiple of 27.27, higher than the industry average of 21.05. However, given the growth prospect, rising estimates and better return on invested capital, a premium valuation is justified.
Image Source: Zacks Investment Research
To Conclude
The crypto market is highly volatile and the recent sell-off bears testimony to the same. While Bitcoin, the largest cryptocurrency, lost 7% on Aug 5, Ethereum, the second-largest cryptocurrency, lost 19.9% on the same day. Nonetheless, both have started gathering pace already.
SEC’s approval of Bitcoin spot exchange-traded funds, the halving of Bitcoin, the anticipated rate cut by the Fed in September and strategic moves to increase the adoption of Bitcoin together point toward rosy days ahead for Bitcoins, per a Motley Fool analyst.
COIN's efforts to accelerate growth in the crypto market, increase market share in spot trading on consumer and institutional trading platforms and improve trading experience along with continued innovation and cost-control initiatives make this Zacks Rank #3 (Hold) a safe heaven. Investors who own the stock should retain it, while others may wait for a better entry point, given its premium valuation.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.