Coinbase (COIN) Edges Higher After Smashing Q2 Estimates, Results Seen as 'Blockbuster' But Analyst Warns Outlook Remains a 'Coin Toss'
Shares of Coinbase (NASDAQ: COIN) are up more than 2.5% in early Wednesday trading after the digital asset exchange presented better-than-expected Q2 results.
The company smashed analyst estimates after it reported earnings per share (EPS) of $3.45 per share on sales of $2.23 billion vs EPS of $2.33 on revenue of $1.78 billion.
“Q2 was a strong quarter for Coinbase with growth and diversification across our platform. Retail Monthly Transacting Users (MTUs) grew to 8.8 million, up 44% from Q1 2021. Verified Users were 68 million. We now have over 9,000 institutions who continue to deepen and broaden their activities in the cryptoeconomy and more than 160,000 ecosystem partners who are using our crypto tools and services to engage with their own customers,” the company said.
Although BTC prices fell sharply in Q2, COIN still generated $1.9 billion in transaction revenue and over $100 million in subscription and services revenue. On the guidance front, the company is expecting the trading volume to decrease in Q3.
“As volatility and crypto asset prices are highly correlated with trading revenue, the crypto market environment heavily influenced our Q2 financial results,” it is further said in the press release.
Wedbush analyst Moshe Katri raised the price target to $300.00 per share from $275.00 on the Outperform-rated COIN after witnessing “blockbuster” Q2 results.
“On the surface, huge quarterly beat, despite a sequential decline in crypto assets on the platform, with September’s MTU’s expected to decline from the June quarter,” the analyst said in a client note.
He particularly outlines a number of positive factors in Q2, namely:
1) The decline In crypto assets values on the platform seem to be a function of a quarterly fall in crypto prices, rather than, declining usage from institutional volumes;
2) While MTUs Are expected to decline in the September quarter, pricing recovery in crypto assets will provide a nice offset, contributing to Q3/CY21 revenues;
3) Annual revenue or fee per user is expected to reach record levels, pointing to the company’s successful monetization efforts;
4) Despite Street’s concerns over the competitive landscape, pricing remains intact, as despite its relatively high fees retailer and institutional investors continue to use the platform given the eco-system’s breadth of products and services; and
5) As expected, Street’s expectations continue to move higher.
Looking forward, Katri further comments:
“Bottom line, on one hand, we see material monetization opportunities at COIN’s 2-sided platforms, providing strong earnings power for the next 3-5 years, which is yet to be captured by the Street. On the other hand, the stock will likely continue to be volatile given multiple broad factors, mostly related to the regulatory environment (China, US).”
Unlike Wedbush analyst, Mizuho’s Dan Dolev is less bullish on the stock as he reiterates his “Neutral” rating and $210.00 per share price target.
“With August average daily volumes running +80% above July, the excitement around the stock in the past week is somewhat understandable. However, since volatility can fade just as quickly as it comes, COIN's FY outlook remains somewhat of a coin toss. We reiterate long-term yield compression risk in an increasingly competitive space,” Dolev said in a client note.
Shares of the company are down nearly 18% since the company went public in April.