Coinbase Earnings Possible to Turn Profitable in Q4 Results

Market analysts are optimistic that the release of Coinbase results for quarter four would likely feature executive guidance on the effect of spot Bitcoin exchange-traded funds (ETFs). The analysts are projecting the US’s largest crypto exchange by transaction volume to report profitability in its final quarter results. 

Coinbase will offer annual guidance during its earnings call on Thursday as part of the highly anticipated quarter-over-quarter improvements. The analysts attribute profitability to the crypto price rally that propelled the COIN stock. However, they seek executive guidance on the crypto exchange’s capability to sustain the recovery. 

Analysts Project Increased Quarter 4 Revenue 

Analysts are awaiting the fourth quarter results, scheduled for Thursday, February 15. The analysts and crypto community are waiting to witness whether the Nasdaq-listed company realized profits in its final three months. 

Morningstar analyst Michael Miller indicated that the majority anticipates Coinbase will report a substantial recovery in the trading revenue and potential profitability during the final quarter. The analyst illustrates that the surge in the crypto prices yielded higher trading volume, constituting a substantial tailwind for Coinbase. 

Bitcoin price rallied by over 50% in the final quarter ahead of the Gary Gensler-led Securities and Exchange Commission (SEC) approving the initial batch of spot Bitcoin ETFs on Wednesday, January 10.

A revisit of the market activity shows that Bitcoin price rose above $44,000 at the onset of December to realize a 25% rise in the 30 days. Although the price plunged below $39,000 during the Grayscale’s bleed, Bitcoin is witnessing a rebound that saw the price eclipse $50,000 on Monday, February 12. 

Analysts Seek Coinbase 2024 Volume Forecasts

Miller indicates that the crypto price rally arose mid-quarter, which hindered Coinbase from reaping the full benefit in the last quarter. Nonetheless, the analysts expect the fourth quarter results to perform better than the third quarter. 

Miller indicates that the third quarter transaction earnings were $289 million, portraying a 12% surge from the second quarter. Yet, the Brian Armstrong-led company sustained a positive outcome for its adjusted EBITDA  of $181 million. 

Oppenheimer and Co. executive Owen Lau forecasts a 16% increase in the Coinbase quarter revenue from $674 million to test above $780 million. The executive approximates that Coinbase will realize $145 billion in trading volumes for its fourth quarter. Such would constitute a 90% increment from the third quarter. 

Lau echoed his January research note that projected Coinbase to attain positive earnings per share (EPS) for the initial time since 2021’s last quarter. Lau indicates that realizing a positive GAAP EPS would be a reputable achievement for an entity widely perceived as non-profitable. 

Analysts are vouching for Coinbase to present its 2024 forecasts for trading volumes besides the expected quarter-over-quarter activity.

Miller notes that Coinbase figures on the average pricing are critical given the diversity in the fees paid relative to the users. The analysts illustrated that retail users incur higher fees than institutional traders since the costs vary relative to the volumes. 

Miller admitted that Coinbase is among the crypto firms reaping the greatest benefits from the more robust markets. The analysts attributed the crypto market intensity to the extra volume from institutions. 

Coinbase Forecasts to Influence Subsequent Rating

Lau considers the Thursday commentary from the Coinbase executives will feature disclosure on the newly approved spot bitcoin ETFs’ effect on the exchange. Also, the executive anticipates including forecasts on ether ETF securing regulatory approval. 

JPMorgan analysts anticipate that Coinbase would likely become the custodian of choice for most funds. The analysts project the company to assume surveillance, trading, and custodial roles for the Ether ETFs. 

The JPMorgan analysts are awaiting the executive commentary in the wake of downgrading Coinbase stock to an underweight rating during its January 22 research note. The analysts considered the flows into the Bitcoin ETFs as underwhelming to the low projections in the run-up to the spot Bitcoin ETFs’ approval. 

The executive commentary could influence subsequent rating of the COIN stock, considering that net inflows into the spot Bitcoin ETFs eclipsed $2.6 billion by Friday, February 9.

The Thursday call is a critical update for the analysts at CFRA Research, who downgraded it in January. The analysts expressed concerns that it could cut trading fees given the low-cost management fees announced by spot Bitcoin funds. 

Lau is optimistic that the Thursday call will reflect on the ongoing lawsuit and its likely impact. The suit features charges leveled by the SEC alleging Coinbase ran an unregistered securities exchange. 

Miller considers the Thursday update to shed light on the derivative and international expansion pursuit undertaken by Coinbase. 

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