Coinbase Global
reports earnings after the close Thursday. The crypto trading platform is riding the wave of climbing token prices, but regulatory issues still loom.
Analysts expect
Coinbase
to report fourth-quarter earnings per share of two cents, based on generally accepted accounting principles, and $826 million in revenue, according to FactSet. That would beat the loss of $2.46 per share on $629 million in sales that the company had a year ago, when the crypto markets were still quaking in the aftermath of the failure of Sam Bankman-Fried’s FTX.
While the crypto market hasn’t yet recaptured the highs seen a few years ago, it is on a definite upswing. Bitcoin on Wednesday traded above $51,500, up 132% from a year earlier, and again passing $1 trillion in total market value. Though Coinbase stock has fallen about 8% so far this year through Wednesday’s close, it has still climbed about 130% in the last 12 months to nearly $160.
On Thursday before the earnings report, J.P. Morgan analysts upgraded Coinbase stock to Neutral from Underweight, citing rising prices of Bitcoin and other tokens, and inflows into Bitcoin exchange-traded funds. They maintained an $80 price target.
“We see the higher cryptocurrency prices not only sustaining, but improving, activity levels and Coinbase’s earnings power as we look to 1Q24,” the analysts wrote.
Coinbase stock rose about 5.4% to $169 in premarket trading.
The 2023 fourth quarter was marked by increasing confidence that the Securities and Exchange Commission would soon approve Bitcoin ETFs, which finally came to pass in January. Investors believe the new funds will bring some institutions and financial advisors into crypto for the first time, and the funds have already gathered billions of dollars in assets.
Coinbase custodies Bitcoin for most of the new funds, for which it is paid fees. But the ETFs also present potential challenges for the company, since many investors will find them less costly than buying Bitcoin through the trading platform directly. Coinbase CEO Brian Armstrong has said he believes the ETFs are a net positive for the company, since it will set many investors on the path of engaging with other aspects of crypto beyond Bitcoin, for which the company can provide services.
At the same time, Coinbase is facing competition from
Robinhood Markets,
Fidelity, and other traditional brokerages that now offer low or zero-commission trading on some crypto assets. Analysts have said Coinbase might have to lower its trading fees as a result of those competitive pressures.
Coinbase also still faces a regulatory overhang. The SEC is suing Coinbase for allegedly operating as an unregistered securities exchange, a charge that the company is fighting. A judge heard arguments from the SEC and the company last month and will rule in the coming weeks on whether a trial is needed.
Write to Joe Light at [email protected]
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