What to Look for from COIN

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Key Takeaways

  • Analysts estimate EPS of -$2.39 vs. $6.47 in Q2 FY 2021.
  • Quarterly trading volume is predicted to decline significantly YOY.
  • Revenue is expected to fall sharply YOY.

Coinbase Global Inc. (COIN) has struggled along with the broader cryptocurrency market in the last several months. A sharp drop in trading volume plunged the company from the fourth- biggest digital asset exchange last year to the 14th-largest by volume as of July. That decline comes as the the company is grappling with other issues. A former Coinbase manager faces criminal charges for insider trading, and the Securities & Exchange Commission (SEC) is investigating whether the company improperly let American customers trade digital assets.

Investors will be watching for signs of how these and other recent developments have impacted Coinbase’s financial performance when the company reports earnings after market on Aug. 9, 2022 for Q2 FY 2022. Analysts are not optimistic. The company is expected to post widening losses per share on a sequential basis and a sharp decline in revenue year-over-year (YOY).

Investors will also focus on Coinbase’s total trading volume. This is not only a key metric of Coinbase’s overall business in the volatile cryptocurrency space, but it also is a primary driver of revenue through trading fees. Analysts expect quarterly trading volume to drop significantly YOY.

Coinbase shares have dramatically underperformed the market in the last year. In August and September 2021, Coinbase stock moved above and then below the S&P 500. It then staged an advance beginning in late September and peaking in November around its Q3 FY 2021 earnings report. Since that time, however, Coinbase shares have plunged. They sank steadily through the company’s Q1 FY 2022 earnings release in May and have traded sideways since that time. As of Aug. 7, Coinbase stock has provided a 1-year trailing total return of -63.6%, well behind the S&P 500’s return of -6.4% over the same time period.


Source: TradingView.

Coinbase Earnings History

Coinbase posted dramatic growth in earnings per share (EPS) in the past two fiscal years. EPS grew from $0.25 in Q1 FY 2020 to as high as $6.47 in Q2 FY 2021. EPS more than doubled YOY for seven out of eight quarters during those two years. But this trend sharply reversed in Q1 FY 2022. Coinbase reported significant losses per share for that quarter, the first time it had reported losses in at least over two years. Now, analysts expect losses to widen in Q2 FY 2022, posting EPS of -$2.39. Note that EPS figures are on a pro forma basis meaning that earnings prior to Coinbase’s initial public offering (IPO) in April 2021 use the share count after the IPO. This is to make an apples-to-apples comparison between pre-IPO and post-IPO earnings figures to avoid the impression that there was a major change in the business at the time of the IPO.

Coinbase’s revenue performance has had a similar trajectory. Save for Q2 FY 2020, when revenue dropped modestly YOY, Coinbase’s revenue grew substantially YOY each quarter of FY 2020 and 2021. Across those two years, revenue skyrocketed from $190.6 million in Q1 FY 2020 to nearly $2.5 billion in Q4 FY 2021. However, revenue dropped sharply YOY in Q1 FY 2022, and analysts expect declines to accelerate for Q2 FY 2022.

Coinbase Key Stats
  Estimate for Q2 FY 2022 Q2 FY 2021 Q2 FY 2020
Earnings Per Share ($) -2.39 6.47 0.48
Revenue ($B) 0.8 2.2 0.2
Total Trading Volume ($B)  219.6 462.0 28.0

Source: Visible Alpha

The Key Metric

As mentioned above, investors look to the key metric of Coinbase’s quarterly trading volume. The company defines this metric as the total U.S. dollar-equivalent value of matched trades that take place between a seller and buyer on Coinbase’s trading platform. The amount of trading activity directly impacts 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. It is heavily impacted by the price of crypto assets. Coinbase has acknowledged that a substantial portion of its trading volume is derived from a small number of customers and from major cryptocurrencies including Bitcoin and Ethereum.

Coinbase’s quarterly trading volume grew massively along with EPS and revenue across FY 2020 and 2021. It surged more than 18-fold from $30.0 billion in Q1 FY 2020 to $548.0 billion in Q4 FY 2021, with the most dramatic gains happening in amid a significant cyptocurrency market rally. Trading volume pulled back modestly YOY in Q1 FY 2022 as crypto prices dropped. Analysts now predict that volume will fall sharply YOY in Q2 FY 2022. Trading volume is predicted to be at its lowest level in at least eight quarters.

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