Why Wall Street is Celebrating Coinbaseโs First Quarterly Profit
Wall Street is buzzing with excitement after Coinbase, the crypto exchange operator, posted its first quarterly profit in two years. The company exceeded analystsโ expectations, posting earnings of $1.04 per share on $954 million of revenue for the fourth quarter, compared to an expected loss of 1 cent per share on $822 million of revenue. As a result, Coinbase shares surged by 15% midday, prompting most analysts to raise their price targets on the stock.
The Positive Outlook
Analysts are optimistic about Coinbaseโs future performance and have raised their 2024 forecasts. They believe that the launch of spot bitcoin exchange-traded funds (ETFs) in the U.S. has not negatively impacted Coinbase as initially expected. Additionally, they see several big upside catalysts ahead that could benefit the exchange.
- Raymond James: Positive outlook for Coinbaseโs shares requires belief in SEC lawsuit being a non-event, continued profitability from retail commissions, cryptocurrency transitioning to actual currency, and no concern over falling user growth.
- Oppenheimer: Returning to profitability is part of their upgrade thesis and they see several catalysts ahead that can improve fundamentals and deliver profitability over the next two years.
The Concerns
Despite the positive earnings report, there are lingering concerns among analysts about Coinbaseโs future performance. Some expressed worry about the lack of use cases for crypto outside of trading and pointed out that the company is still embroiled in a legal dispute with the U.S. Securities and Exchange Commission (SEC).
- Bank of America: Maintains underperform rating due to crypto market unpredictability, lack of revenue diversification, valuation concerns, and continued legal overhang.
- JPMorgan: Remains unconvinced about the true monetization impact of spot bitcoin ETFs and potential loss of volumes in spot markets.
Analyst Recommendations
Several Wall Street firms have weighed in on Coinbaseโs performance with varying recommendations based on their assessment of the companyโs current standing and future prospects.
- Goldman Sachs: Encouraged by managementโs plan to prioritize initiatives in crypto payments but remains sell-rated due to expectations tied to market conditions and broader use cases remaining farther out on the horizon.
- Keefe, Bruyette & Woods: Upgraded to market perform given strong crypto price action YTD and material inflection in USDC balance growth.
- Canaccord Genuity: Maintains buy rating with hopes for more use cases for crypto through facilitating transactions via its Layer 2 protocol known as Base.
The Road Ahead for Coinbase
Coinbaseโs stellar performance has ignited optimism on Wall Street, but lingering concerns about regulatory uncertainties continue to cast a shadow over its future prospects. As it navigates through legal disputes and strives to expand its use cases beyond trading, all eyes will be on how it responds to evolving market conditions while maintaining profitability.
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