Coinbase Global (Nasdaq: COIN) shares were 7% lower following the company's Q3 earnings report in which the company fell short of analysts' revenue targets. The biggest culprit seems to be decreased trading volumes for cryptocurrencies. There are signs that this may be abating as Q4 is starting with many coins moving to new highs.
Overall, Coinbase shares are off about 20% from all-time highs, set in the first week of trading. Shares are also 66% higher from mid-May lows. Coinbase is unique among IPOs and fintech companies in being profitable.
Inside the Numbers
In Q3, Coinbase reported earnings per share of $1.62 per share. Revenue came in at $1.31 billion which fell short of consensus expectations of $1.57 billion but was more than quadrupled from last year. Compared to Q2's $2.2 billion in revenue, it was a sharp drop which the company ascribed to less public interest due to softness in prices over the summer.
This was also evident with monthly transacting users falling to 7.4 million from 8.8 million in Q2. Compared to last year, it was a 21% increase. Trading volume also declined in Q3 from Q2 to $327 billion from $462 billion. The company expects both figures to be higher next year.
Currently, bitcoin accounts for 19% of trading volume, and ethereum accounts for 22%. The remaining 59% came from other crypto assets, and this source is growing by 50%. Assets increased to $255 billion from $180 billion with 55% coming from institutional investors.
The company is also mired in negotiations with the SEC over a crypto lending product that would provide access to parts of the defi economy for Coinbase account holders. It's also planning to launch an NFT marketplace in the coming months. The company has also been hired by Meta Platforms (NASDAQ: FB), formerly Facebook, to deal with setting up digital wallets for users.
Stock Price Outlook
Coinbase's stock price is dependent on cryptocurrencies in the near term. Right now, nearly all are at new, all-time highs, and the ingredients seem to be in place for a blowoff. However, it may be better to play such an outcome with the actual coins rather than Coinbase. And, if crypto prices drop, then Coinbase's stock would likely suffer as well.