Coinbase Expected to Report Losses Amid Retail Trading Decline, Say Wall Street Analysts

Key Insights:

Analysts predict that Coinbase may fall short of Wall Street’s earnings expectations due to a significant reduction in retail crypto trading activity.
Revenue from subscriptions linked to USDC interest and blockchain staking is anticipated to remain steady, providing some relief against weaker transaction income.
Despite some support from institutional trading and stablecoins, analysts caution that profit margins may face pressure, with retail trading trends remaining delicate as they approach the second quarter.

Coinbase (COIN) is approaching its first-quarter earnings announcement under uncertain conditions, with four analysts forecasting disappointing results stemming from a downturn in retail trading, which likely impacts the company’s most lucrative segments.

The earnings report is expected after market hours on Thursday, with projections showing the earnings per share (EPS) declining from $2.26 to $1.93 and total revenue expected to decrease from $2.27 billion to $2.1 billion, according to FactSet data.

In the same quarter last year, the company posted an EPS of $4.40 with revenues of $1.2 billion. The anticipated trading volume this quarter is around $403.8 billion, compared to $439 billion in the previous quarter.

Analyst Insights:

J.P. Morgan lowered its EPS estimate to $1.59, pointing to a 10% drop in Coinbase’s trading volume and a 17% decrease in the overall cryptocurrency market cap.
Adjusting for losses linked to crypto assets, they forecast an EPS of $2.39, underpinned by managed expenses and consistent subscription revenue.
Barclays and Compass Point predict steeper declines in performance. Barclays adjusted its revenue and EBITDA expectations downward, observing a marked cooling in the market since January despite growth in stablecoins, estimating retail volumes at $69 billion, which is lower than the street average of $79.8 billion.

Compass Point has grown increasingly pessimistic, downgrading the stock and forecasting transaction revenues at $1.24 billion, 7% below average estimates.

Stablecoins as a Positive Factor

Recent trends indicate a surge in stablecoin revenues, which could provide some support.

Coinbase’s revenue from USDC increased notably as the stablecoin’s market cap rose by 42% within the quarter, bolstering subscription income. Barclays projects around $304 million in USDC-related revenue for the first quarter, while even cautious analysts at Compass Point concede this is helping to mitigate declining staking earnings from falling ether prices.

Oppenheimer has adjusted its volume estimate to $380 billion down from $440 billion, but noted gains in Coinbase’s U.S. spot trading market share, a potentially encouraging sign, depending on how retail traders respond.

Analysts express worries over the long-term competitive environment, recognizing that decentralized exchanges, particularly those functioning on quicker and cheaper blockchain networks such as Solana and Coinbase’s Base, are capturing retail user interest seeking greater trading opportunities.

Despite an increase in market share, Coinbase’s preeminence as a regulated central exchange may not suffice to counteract these emerging trends.

Looking forward, analysts alert that a prompt resurgence in trading might take time, particularly as retail traders are often reluctant to re-engage until they recover previous losses.

Coinbase shares have declined 23% year-to-date, currently valued at $198.06, while bitcoin has seen a 3.8% increase since the year’s start, priced at $97,023.