Why Coinbase's stock is shrugging off a monster earnings beat

By Emily Bary

Analysts see a few reasons to quibble, including a potential slowdown this quarter

Coinbase Global Inc.'s profit for the latest quarter was roughly four times what analysts were expecting. Revenue beat estimates, too.

So why are Coinbase shares (COIN) falling about 3% in Friday morning trading after that blowout quarter?

Analysts saw a few reasons to quibble.

For one, while the first-quarter results were strong, trends could cool in the second quarter. Mizuho analyst Dan Dolev flagged that the company's $300 million-plus in transaction revenue for the month of April suggests the current quarter's run rate is 16% below what was seen in the last quarter.

Also read: Coinbase had over $1 billion in quarterly profit after crypto-trading explosion. But costs are rising too.

Dolev also highlighted that alt-coins and staking accounted for 45% of revenue in aggregate during the latest quarter, up from 42% in the fourth quarter and 32% in the same period a year before.

Those areas are "are subject to potential regulatory scrutiny," he wrote, which adds risk to Coinbase's business.

On the whole, Wall Street generally expected Coinbase's results to be strong in light of rising cryptocurrency volatility to start the year. But the upside in areas like subscription and services wasn't large enough to justify the stock's roughly 30% rally so far in 2024, Dolev said.

Dolev has an underperform rating and $145 target price on the stock.

Barclays analyst Benjamin Budish also wondered about a potential "breather" in April, pointing to data from crypto-industry media outlet the Block that indicated about $90 billion in volumes for the month. If that trend carried through to the rest of the quarter, it would imply a 13% sequential decline in volumes, he said.

But in terms of transaction revenues, it's possible the run rate "may not be too different from [first-quarter] levels, though it is hard to tell if broader ecosystem activity will persist at the same levels," Budish wrote.

He has an underweight rating and $179 target price on the shares.

Read: Bitcoin is falling - but could still score new all-time highs this year. Here's why.

Needham analyst John Todaro stayed bullish but also said he was becoming a bit more cautious.

He noted a weakening of crypto prices in the second quarter, the start of outflows from bitcoin exchange-traded funds and the prospect of macroeconomic pressures on risky cryptocurrency plays. "Retail came back during [the first quarter], but downward price momentum threatens to flush [those investors] out," Todaro wrote.

He has a buy rating on the stock but lowered his price target to $260 from $275.

-Emily Bary

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05-03-24 1121ET

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