Coinbase released its Q4 2023 earnings report yesterday, crushing analyst expectations and sending COIN ripping upwards by over 12% in after-hours trading. What did the earnings call reveal?
Just prior to the earnings release yesterday, investment bank JPMorgan upgraded COIN from underweight to neutral with a price target of $80. The bullish ratings adjustments have continued to trickle in today, with a host of financial services companies raising their price targets after Coinbase’s $1.04 in earnings per share outperformed Wall Street’s estimates by 290%!
1/ Coinbase $COIN Q4 2023 Results:
— Lumida Wealth Management (@LumidaWealth) February 16, 2024
Beats Earnings by ~290% & Beats Revenue expectations by ~16%
Total Revenue: $953 MM, up 50% YoY, up 41% QoQ
Net Income: $273 MM, up from a loss of - $557 MM YoY, up from a loss of - $2 MM QoQ
Shares up ~12% in premarket trading pic.twitter.com/iPpFx8vaS9
While Coinbase’s volumes remain dominated by institutions, Coinbase’s Q4 earnings clearly depicted the return of the retail trading activity, with retail volumes up 164% last quarter compared to the 92% increase in institutional trading volumes.
Subscription and services revenue, a stickier income stream than trading revenue that has been a key focus for Coinbase to grow in their effort to bring stability to earnings, increased by 12% quarter-over-quarter to $375M.
In 2024, Coinbase aims to grow trading revenue by expanding internationally, an effort that will likely be helped by the availability of their perpetuals trading products overseas, and will continue their work in driving utility to crypto through payments by developing the Coinbase Wallet into an onchain superapp.
On the bull side, there remain plenty of catalysts for COIN, which is bound to become a rocketship if crypto prices continue to trade higher, could face positive tailwinds from the resolution of their overhanging SEC lawsuit, and is well positioned to earn fee income as the custodian from newly established ETF products.
While the future of Coinbase looks promising should crypto trading volumes remain strong, looming interest rate cuts threaten to slice the subscription and services revenue they enjoy through their partnership with Circle, resulting in disaster if trading volumes fall in tandem with rates in the event the macroeconomic situation further declines.
A few thoughts on our Q4 Earnings yesterday:
— Brian Armstrong 🛡️ (@brian_armstrong) February 16, 2024
2023 was a great year for Coinbase and we’re in a strong financial position. We cut costs by 45% y/y and shipped products faster with a leaner team driving $95 million of positive net income for 2023, $964 million in positive Adj.… pic.twitter.com/XK8f0EQBdP