Coinbase (Nasdaq: COIN) shares were 17% lower following the company's Q3 earnings report which showed a miss on the top and bottom lines despite reporting stronger user numbers than expected. However, the company's stock price has been more affected by the bear market in the crypto market and the unveiling of several frauds in the space including FTX which was the second-largest exchange.
There are now mounting concerns about the liquidity positions and solvency of every company in the crypto space including Coinbase. This has resulted in the share price being down more than 81% YTD and off by more than 90% from it's all-time high soon after its IPO in April 2021.
Inside the Numbers
In Q3, Coinbase reported a loss of $2.43 per share which was steeper than expectations of a loss of $2.40 per share. Revenue missed expectations at $590 million vs $654 million and was down by 52% from last year. Similarly, the company had a loss of $500 million for the quarter after posting a profit of $400 million in last year's Q3.
The company said that the weakness in crypto markets led to fewer user transactions and volumes which negatively impacted revenues. Retail transaction revenue was $346 million, down from $1 billion last year and below analysts' expectations of $454.2 million. Total trading volume in October was $47 billion which is another indication that momentum for the company is rapidly slowing.
Of course, these trends are only likely to get worse over the last few weeks with another 20% drop in bitcoin and the blowup of FTX which is leading to people and institutions pulling their money out of crypto markets across the board.
Coinbase has also seen its user base shrink as a result. In Q3, it had 8.5 million monthly transacting users which were down from 9 million in Q2 and 9.2 million in Q1. However, this was slightly better than analysts' expectations of 7.8 million active users.
In terms of a forecast, Coinbase gave limited guidance due to numerous uncertainties. It sees a full-year loss of $500 million and monthly users of just under 9 million. The company continues to focus on controlling costs especially since it went on a hiring and spending binge last year. In total, the company has cut about 18% of its workforce.