This past week, Coinbase (NASDAQ:COIN) reported first-quarter revenue which beat analst forecasts, which is mainly attributed to the Bitcoin, Ethereum and wider crypto markets rally leads to surge in profit
Coinbase announced better-than-expected revenue for its Q1 2024 earnings report that was released on Thursday (May 2, 2024). The company’s stock was trading around 2% lower during extended trading.
Here’s how Coinbase performed, compared to analysts’ outlook from LSEG.
- Earnings: $4.40 per share. That might not be comparable to the $1.09 average analyst figure.
- Revenue: $1.64 billion compared to $1.34 billion expected
- Coinbase, the main marketplace in the U.S. for acquiring and selling crypto tokens, recorded total income of $1.18 billion, or $4.40 per share, compared to previous FY loss of $78.9 million, or 34 cents per share.
In February of this year, Coinbase reported its first profit in two years.
Profit in the quarter reportedly includes a $650 million mark-to-market gain on digital assets held for investment in connection with the firm’s adoption of enhanced accounting practices.
Consumer transaction revenue stood at $935 million for the quarter, up more than 100% from the year-prior.
And total transaction revenue nearly 3x in the quarter to $1.08 billion.
Transaction revenue has typically been a key driver of earnings, with subscription and services revenue nettin about $511 million for the quarter.
Coinbase shares surged nearly 9% on May 2 after the release of the report and have also surge around 32% YTD following an increase of 5x back in 2023.
The stock usually does well when Bitcoin experiences big rallies which also leads to increased crypto trading volumes and demand for other digital services.
During Q1, BTC (barely) reached an all-time high of over $73,000 in March, and Ethereum complete its first key upgrade in more than a year.
The blockchain and crypto space has also witnessed a surge of institutional investors following US the Securities and Exchange Commission approval of several U.S. spot bitcoin exchange-traded funds.
Many of the ETFs teamed up with Coinbase as their custody partner. By the end of Q1, the funds had netted a combined $50 billion+.
Total net inflows reache their max April 8, according to Raymond James analysts, and have since decline, along with a drop in the BTC price.
As reported by CNBC, Raymond James analysts said:
“The price of Bitcoin peaked as the pace of inflows moderated, and has been drifting modestly lower since mid-March. Indeed, trading volumes on Coinbase’s platform have come well down from early-March levels.”
At present, Coinbase is still caught up in a legal battle with the SEC. In March, a Judge had stated that the SEC’s assertion that the digital asset exchange took part in unregistered sales of securities may be heard by a jury at trial.
Another challenge for Coinbase is increase competition from Crypto.com, which has manage to get back considerable market share as of late.
Another issue to higlight is the case of several insiders at Coinbase, including members of the C-suite, who had collectively sold $383 million of the firm’s shares during Q1, according to analysts at Raymond James.
This was reportedly over twice the amount sold in Q4 2023 and the largest amount of insider selling ever since Coinbase had listed on the Nasdaq back in 2021.
David Azaraf, a crypto industry professional, stated:
“Coinbase smashed all Q1 earnings estimates last night. Two lines from their earnings report tell the whole 2024 crypto story. Coinbase saw a combined $312B in quarterly trading volume. $56B came from retail, $256 came from institutions. How does that compare to the previous bull market? If we look at the 2021 averages, we find a stunning nugget. Coinbase did an average of $134B in quarterly retail volume in 2021. That’s more than double the (impressive) Q1 2024 numbers.”
He added:
“And institutions? They traded an average of $284B per quarter in 2021.That’s barely 10% more than they traded the last quarter. If you needed any more confirmation that this is an insitutional-driven rally, here you go. Which begs the question. What will the market look like once the retail volume climbs to 2021 highs? Boolish $COIN. Boolish $BTC. NFA. NLA. DYOR.”
