Coinbase Seen Swinging to Loss as Trading Dries Up

Focus on COIN total trading volume

Billboards showing Coinbase NFT logo

Noam Galai / Getty Images

Key Takeaways

  • Analysts estimate EPS of -$2.41 for Q3 FY 2022 vs. $1.62 in Q3 FY 2021.
  • Quarterly trading volume is predicted to drop by about half.
  • Revenue is expected to fall for a third consecutive quarter.

Coinbase Global, Inc. (COIN), one of the world's top cryptocurrency exchanges, probably swung to a loss in the third quarter from a year ago as trading volume slowed and crypto prices dropped.

Coinbase likely lost $2.41 a share, compared with profit of $1.62 in the same period a year ago, marking its third straight quarterly loss, as revenue fell by more than half to $600 million, according to average estimates from Visible Alpha. Note that EPS are on a pro forma basis, meaning in this case that earnings prior to Coinbase's initial public offering (IPO) in April 2021 use the share count following the IPO for consistency of comparison.

Customer interest in cryptocurrency exchanges has slid in recent months, reflecting the declining prices of many leading digital tokens and the inaccessibility of mining hardware related to supply chain issues. Still, the spread of blockchain technology across industries and increasing acceptance of cryptocurrencies by government regulators could lead to additional interest in coming years.

Analysts expect Coinbase's trading volume, a key metric of its overall business and a primary driver of revenue through trading fees, to drop to the lowest in eight quarters.

Coinbase stock plunged from late 2021 through May of this year and has been steady since then. It's down 81% in the past year, compared with a drop of 17% for the S&P 500 Index.

One-year total returns of the S&P 500 Index and Coinbase Global, Inc. (COIN)
Source: TradingView.

Coinbase Earnings History

Coinbase posted consistent and increasing profit through much of 2020 and 2021, reaching a high in Q2 2021. Net income dropped in the second half of 2021. Starting in Q1 2022, the company has reversed course, with two quarters of significant losses that analysts expect to continue into Q3.

Coinbase's revenue has followed a similar trajectory, growing through most of 2020 and 2021 before tumbling in 2022. Analysts predict revenue to plunge to the lowest levels in eight quarters for Q3.

Coinbase Key Stats
  Estimate for Q3 FY 2022 Q3 FY 2021 Q3 FY 2020
Earnings Per Share ($) -2.41 1.62 0.90
Revenue ($B) 0.6 1.3 0.3
Total Trading Volume ($B) 166.3 327.0 45.0

Source: Visible Alpha

The Key Metric

Coinbase's quarterly trading volume reflects the total U.S. dollar-equivalent value of matched trades that take place between a seller and buyer on the company's trading platform. The amount of trading activity directly affects Coinbase's revenue, which is largely derived from transaction fees. Trading activity also reflects Coinbase's liquidity, overall trading health, and the broader performance of the cryptocurrency economy. The price of crypto assets has a major impact on the exchange's total trading volume.

Coinbase's trading volume jumped into the first half of 2021. Growth slowed in the second half of the year. Volume then declined in the first two quarters of 2022.

Article Sources
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  1. Visible Alpha. "Financial Data."

  2. Yahoo! Finance. "Coinbase Earnings Preview: Here Are the Three Factors Analysts Are Watching."

  3. Yahoo! Finance. "Global Cryptocurrency Market Report 2022: Lucrative Opportunities in the Growing Acceptance of Cryptocurrency Across Various Industries."

  4. CoinMarketCap. "Top Cryptocurrency Exchanges Ranked By Volume."

  5. Coinbase Global Inc. "Form 10-K for the Fiscal Year Ended December 31, 2021," Page 93.

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