Coinbase Q2 Profit Surges on Crypto Investment Gains, Shares Fall Despite Revenue Miss

On August 8, 2024, Coinbase announced its financial results for the quarter ended June 30, 2024. The company reported a net income of $1.43 billion, or $5.14 per share, up from $36.13 million, or $0.14 per share, in the same period a year earlier. This increase was largely attributed to a $1.5 billion gain, including an unrealized gain related to Coinbase's investment in Circle, and $362 million from its crypto investment portfolio.

On an adjusted basis, Coinbase earned $1.96 per share, exceeding analyst estimates of $1.26, as reported by LSEG. Revenue for the quarter rose to $1.5 billion from $1.45 billion year-on-year, but fell short of analysts' expectations of $1.6 billion. Transaction revenue was $764 million, missing StreetAccount estimates of $787 million.

Retail trading volume grew 16% year-over-year to $43 billion, below the expected $48.05 billion. Subscriptions and services revenue, which includes stablecoins, staking, interest income, and custody, reached $655.8 million, up 9% from the previous year but short of the projected $705.9 million. Stablecoin revenue accounted for $332.5 million, representing a 38% increase year-over-year and a 12% rise from the first quarter.

Despite the profit rise, Coinbase shares fell by 6% in after-hours trading following the revenue miss. The company announced plans to expand its app beyond crypto, offering tokenized real-world assets, derivatives, prediction markets, and early-stage token sales, initially targeting U.S. users.

Coinbase shares are still up over 50% year-to-date and joined the S&P 500 in May 2024.

Coinbase has seen its stock price surge to a 52-week high, buoyed by a surge in interest surrounding stablecoins and optimistic analysis from industry experts. The increase in share value has been attributed to a robust sentiment in the cryptocurrency markets, particularly following recent positive trends in Bitcoin pricing. Analysts are calling Coinbase the "one-stop Amazon" for cryptocurrency services, highlighting its comprehensive offerings that cater to various aspects of crypto trading and financial management. The stock's performance reflects growing investor confidence, as it has been buoyed by stablecoin activities that are increasingly becoming mainstream within the financial ecosystem. This rapid ascent comes amidst a backdrop of heightened trading activities and strategic investments by Coinbase, which underscore its pivotal role in the evolving landscape of digital currencies. As the cryptocurrency market continues to attract more institutional clientele, Coinbase is well-positioned to leverage this momentum to solidify its market share. The implications of these developments are significant, as they suggest a renewed vigor in crypto-market engagement, possibly influencing broader financial trends going forward.

According to Bernstein’s analyst Gautam Chhugani, Coinbase is considered the most misunderstood crypto stock. He has elevated the company's price target from $310 to $510 per share, implying a potential upside of approximately 48%, as shares closed at $344.82 on Tuesday afternoon. Chhugani maintains an outperform rating, highlighting that the market is underestimating Coinbase's growth potential despite it being the only crypto company included in the S&P 500. The firm dominates the U.S. crypto trading landscape and features the largest stablecoin business among exchanges, alongside significant stakes in institutional crypto trading with the acquisition of the largest global crypto options exchange. Notably, Coinbase also manages the largest and fastest chain on Ethereum, creating a substantial tokenization network. Despite competitive threats, Coinbase has successfully maintained market share and is positioned to benefit from the upcoming GENIUS Act, which aims to regulate stablecoins, as well as the CLARITY Act, aimed at blockchain regulations. In addition to its current operations, Coinbase is looking to expand into the futures market, which Chhugani estimates will provide a considerable revenue boost, projecting total revenue to reach around $9.5 billion this year. Following the announcement of the new price target, Coinbase shares rose 2% in premarket trading, indicating positive investor sentiment regarding the stock’s potential.

Coinbase, a leading cryptocurrency exchange, has seen its shares rise as investors anticipate clearer U.S. stablecoin regulations. The company's stock performance reflects market optimism surrounding regulatory clarity, which could benefit Coinbase significantly. Additionally, Coinbase has relocated its European Union (EU) hub to Luxembourg, a strategic move aimed at strengthening its presence in the region. This shift aligns with the company's broader strategy to navigate evolving regulatory landscapes and expand its global footprint. Meanwhile, bitcoin and ether prices remain relatively stable as investors evaluate the Federal Reserve's potential interest rate adjustments and President Trump's approach to the Israel-Iran conflict. Phil George of EarnOS highlighted the growing interest among brands in adopting stablecoins, underscoring their potential for future applications. The U.S. Senate's recent actions to facilitate tokenized trading further bolster Coinbase's market position, adding momentum to its growth trajectory. These developments collectively highlight Coinbase's adaptability and readiness to capitalize on emerging opportunities in the cryptocurrency sector.