Wall Street cheers Coinbase after its first quarterly profit in 2 years, but skepticism lingers
Wall Street is celebrating Coinbase after the crypto exchange operator posted its first quarterly profit in two years. Late Thursday, Coinbase posted earnings of $1.04 per share on $954 million of revenue for the fourth quarter. Analysts surveyed by LSEG, formerly known as Refinitiv, were expecting a loss of 1 cent per share on $822 million of revenue. The shares were higher by 15% midday. Most analysts covering the stock raised their price target on the shares Friday. Several also increased their 2024 forecasts, noting that the launch of spot bitcoin exchange-traded funds in the U.S. haven’t weighed negatively on Coinbase as initially expected and that bitcoin has several big upside catalysts ahead that could benefit the exchange. “Happy days are here again” for Coinbase, as Raymond James put it, but it’s not clear for how long. Many analysts also expressed continued concern about the lack of use cases for crypto outside of trading. Others pointed out that the company is still entangled in a legal dispute with the U.S. Securities and Exchange Commission, as well as the fact that the still-uncertain U.S. regulatory environment could weigh on the stock. Here’s what everyone had to say about what to make of Coinbase’s stellar performance going forward: Goldman Sachs, sell, PT $170 “We are encouraged by [management] commentary that they expect to prioritize initiatives in crypto payments in 2024, which we believe is the most credible long term use case for broadbased crypto adoption,” said Goldman analyst Will Nance. “Looking ahead however, we expect the biggest driver of COIN’s results to be market conditions, including crypto prices and volatility, and expect broader use cases to remain farther out on the horizon. Thus, we remain Sell rated.” Bank of America, underperform, PT $79 “Transaction revs came in better than expected largely due to another quarter of take-rate outperformance,” said Jason Kupferberg from Bank of America. “That said, we maintain our U/P rating given crypto market unpredictability, lack of revenue diversification, valuation, and continued legal overhang.” “On January 17th, oral arguments for COIN’s motion to dismiss the SEC’s lawsuit occurred,” he added. “No timeline has been given for a decision on the motion but COIN outlined several scenarios … In our view, the lawsuit continues present an element of uncertainty for the stock.” Barclays, underweight, PT $146 “While the longer-term sustainability of this recent strength remains somewhat unclear in our view, our estimates and PT come up on the back of strong results,” said Barclays’ Benjamin Budish. “Q4 revenues and adj. EBITDA beat handily, driven by meaningfully higher than expected retail trading volumes,” he added. “This strength seemed to continue into the new year, with quarter-to-date (through Feb. 13) revenues trending nicely ahead of Street estimates, the take rate largely in line with the Q4 average, and the emergence of spot bitcoin ETFs not having any negative impact, it seems, on the trading business.” Raymond James, underperform, PT NM “To be positive on Coinbase’s shares in our view you need to believe the following: The SEC’s lawsuit against Coinbase will prove to be a non-event; Despite offering a commoditized service Coinbase will continue to charge its retail customers ~2% commissions indefinitely; Despite years of failed attempts, at some point cryptocurrency will graduate from pretend money status to actual currency; A two-year trend of falling user growth is nothing to be concerned about. We do not share such optimism,” Raymond James analyst Patrick O’Shaughnessy wrote Friday. JPMorgan, neutral, PT $95 “Management calls spot bitcoin ETFs [a] net positive but, we’re still unconvinced,” said JPMorgan’s Kenneth Worthington. “Given the media attention and market anticipation for spot bitcoin ETFs especially considering Coinbase’s direct participation and monetization efforts, we were hoping management would have provided more robust insight into the economics of the arrangements with issuers. Given this lack of detail, we remain skeptical as to the true monetization impact of these ETFs and its ability to outweigh the potential loss of volumes in the spot markets, which we still see as possible.” JPMorgan upgraded Coinbase on Thursday to neutral from underweight , reiterating its neutral rating Friday. Keefe, Bruyette & Woods, upgrade to market perform, PT $160 “While we are skeptical that the current level of retail enthusiasm/speculative activity can persist for a prolonged period, we are still moving to market perform from underperform given 1) extremely strong crypto price action YTD and knock-on impacts to COIN’s revenues, and 2) a material inflection in USDC balance growth (+15% YTD),” said KBW’s Kyle Voigt. ” USDC balances have finally inflected, and these drive [a] significant portion of gross profit/EBITDA,” he continued, adding, “regulatory environment remains uncertain, but upcoming election could provide some relief.” Oppenheimer, outperform, PT $200 “Returning to profitability is part of our upgrade thesis, and this result can help change the unprofitable image,” said Oppenheimer analyst Owen Lau. “More important, 1) 1Q volume is up 38% quarter-over-quarter, by our estimate, 2) the market cap of USDC has increased steadily to $28 billion since December, and 3) guidance for 1Q24 is better than expected.” “With several catalysts ahead, including further adoption of spot bitcoin ETF, halving, potential approval of ether ETF, Fed’s rate cut, and resolution of the SEC lawsuit, we think COIN can improve its fundamentals and deliver profitability over the next two years barring a macro downturn and lumpy mark-to-market treatment,” he added. JMP, outperform, PT $220 “We were pleased with Coinbase’s 4Q performance, but were even more encouraged by the outlook commentary as the firm is benefiting from increasing enthusiasm in digital assets, coupled with numerous company-specific growth initiatives which the firm is diligently executing on,” said JMP’s Devin Ryan. “We had argued that the ETF launch would be a significant net benefit, and not cannibalistic to Coinbase, and we think this is playing out thus far.” “We appreciate the high degree of volatility that can exist in the digital asset industry as it matures; thus, we believe investors must continue to assess risks in Coinbase accordingly, particularly with lingering regulatory uncertainty,” the analyst added. Needham, buy, PT $220 “Alt-coin share of volume increased to the highest levels in 2023 at 71%, which assuages concerns that COIN is too reliant on bitcoin volume in an environment where low-cost bitcoin ETFs now exist,” said John Todaro of Needham. “We do not expect fee compression in alt-coin trading.” “We are raising our price target to $220 and our 2024 estimate on the back of higher staking rewards and trading revenue for FY24,” he added. Canaccord Genuity, buy, PT $240 “We look for COIN to drive more use cases for crypto, especially in facilitating transactions via its Layer 2 protocol known as Base,” Joseph Vafi from Canaccord wrote. “We also look for progress on the regulatory front in 2024 on the heels of the spot BTC ETF approvals.” Additionally, “COIN is a large participant in the crypto Superpac Fairshake, which is driving collaborative advocacy to the regulatory front for crypto. If the BTC ETF ramps go smoothly over the next few quarters we believe resistance to crypto advances could be reduced.” — CNBC’s Michael Bloom contributed reporting.
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