Coinbase (COIN) Gains as Revenue Triples, Analyst Raises PT on 'Robust' Activity Levels

May 14, 2021 9:19 AM EDT
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Price: $230.66 --0%

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    11 Buy, 4 Hold, 1 Sell

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Shares of Coinbase (NASDAQ: COIN) are up 3.5% in pre-open Friday after the crypto exchange reported its quarterly earnings in the first report since going public.

The report was mostly in line with Coinbase’s estimates issued on April 6 ahead of the company’s public debut. COIN reported earnings per share of $3.05 on revenue of $1.8 billion, compared to $585 million in the previous quarter. Net profit came in at more than $771 million, a massive jump from $177 the company reported in Q4 2020, and 24 times higher than in the year-ago period.

“Our strong Q1 2021 results reflect the strength of the crypto price cycle we entered in Q4 2020. We saw many crypto assets reach all time high prices, high levels of volatility, and increased interest across the entire cryptoeconomy. Crypto market capitalization reached nearly $2 trillion at the end of Q1 2021 compared to $782 billion at the end of Q4 2020,” the company said in a statement.

“This market environment drove strong engagement with the Coinbase platform, reflected in retail, institutional and ecosystem partner growth across all key metrics including our Verified Users, retail Monthly Transacting Users (MTUs), Trading Volume, and Assets on Platform.”

The crypto exchange said it intends to list the popular dogecoin in the following four to eight weeks after the cryptocurrency skyrocketed 26,000% over the past six months. The outstanding performance in the first quarter was almost completely driven by the recent crypto boom as about 94% of Coinbase’s net revenue during this period came from trading transaction fees.

During the quarter, Bitcoin prices nearly doubled while Ether prices almost tripled, Coinbase wrote in an introductory note. The Wilmington, Delaware-based crypto exchange platform charges higher transaction fees than its rivals.

“We’re not trying to win on fees. We’re not trying to compete on fees. We’re competing on being the most trusted. We are dealing with unprecedented growth in demand, and our focus was making sure that our exchange stayed up,” said Coinbase’s CFO Alesia Haas.

Coinbase said the number of monthly users on the platform doubled from the previous quarter from 2.8 million to 6.1 million, while trading volume increased by nearly threefold quarter-over-quarter.

While Coinbase did not provide any earnings nor revenue guidance for Q2 or the full year, it said it expects the number of monthly transacting users to land between 5.5 million and 9.0 for the full year, depending on future cryptocurrency prices. The crypto exchange also expects annual average net revenue to surge above the $35 - $45 range that it’s averaged for the last two years.

Loop Capital analyst Kenneth Hill reiterated its “Buy” rating and raised his price target to $398.00 per share amid “robust” Q1 activity levels.

“Given that COIN published estimated results back on April 6th, there weren’t any surprises with the full 1Q21 report. What was most relieving to see was that robust 1Q21 activity levels have carried into 2Q21 at equal or greater strength (stronger MTUs, trading volumes, etc.). Those trends are pushing our estimates and price target higher (from $394 to $398) despite some of the recent volatility,” the analyst wrote in a note.

“On the recent volatility, the stock has been incredibly unstable since its debut (more than we anticipated). The past few days in particular have been rough - the result of Elon Musk’s energy usage concerns related to mining (subsequently halting the acceptance of Bitcoin for Tesla purchases) and Binance facing DoJ and IRS investigations. To us, these industry issues seem transitory or like positives for COIN. On the Musk concerns - regardless of the realities of energy usage in crypto (where renewables play a major role, etc.) the discussion is helpful for new industries to facilitate better understanding, potentially better processes, and better outcomes moving forward.”

Overall, the analyst sees COIN well-positioned to weather growing pains as “it won’t be all smooth sailing from here.”

DA Davidson analyst Gil Luria reiterated the “Buy” rating and $650.00 price target on the stock on the back of the Q1 results which were consistent “with its fantastic pre-announcement” as well as an encouraging guidance for the current quarter.

“Management indicated “quarter to date performance across our four key business metrics are trending to meet or exceed our Q1 results”. Considering most estimates (ours included) forecasted a big sequential decline between Q1 and Q2, this is a good reminder that Coinbase’s results are driven by volatility (which has continued) more than asset appreciation (which has been mixed),” Luria wrote in a note.

“We are increasing our 2021 revenue estimate to $5.8B from $4.4B and EBITDA to $3.1B from $2.2B to reflect current trends. We are reiterating our BUY rating and $650 price target which represent a 30x multiple of 2021 revenue. This represents offsetting impacts from a higher revenue estimate and lower comparable multiples as high-multiple stocks have been under pressure recently.”

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