Coinbase (Nasdaq: COIN) shares soared more than 24% following its Q2 earnings report despite missing analysts' expectations on the top and bottom line. However, the stock has given up about half of these gains in the ensuing sessions.
The company's fortunes have done a 180 along with the crypto market. A year ago, crypto's boom was just ending, but it wasn't obvious till months later. Now, it's certainly a bear market with some speculating that a longer, 'crypto winter' could be starting.
However, the bigger story is the nascent recovery in some crypto markets, most notably Ethereum and certain altcoins like Solana, while bitcoin, defi, and NFTs remain moribund. Certainly, Coinbase's price action is consistent with a bottom in the stock as investors were willing to look past the company's poor results. This type of price action and reaction to negative earnings is happening across the growth stock spectrum.
Inside the Numbers
In Q2, Coinbase reported a loss of $4.98 per share which was much steeper than expectations of a loss of $2.65 per share. Revenue came in at $808.3 million vs $832.2 million, a 64% drop from last year with the biggest factor being retail transaction revenue declining by 66%. Overall, the company lost $1.1 billion in the quarter, a stark turn from last year's $1.6 billion in profit.
It reported 9 million monthly transacting users, down 200,000 from last quarter, but above analysts' expectations of 8.7 million. Another silver lining is that due to bigger losses in other companies, Coinbase's market share of total crypto value remained stable at 9.9%.
Confidence in the crypto markets has plummeted due to numerous bankruptcies and liquidations, so it's unlikely that volume and activity will immediately bounce back to new highs.
The company has continued its pivot to cost-control as it froze hiring into the foreseeable future and reduced headcount by 18%. Due to plunging crypto prices, assets on the platform fell to $96 billion from $256 billion last year. Currently, 31% of transaction revenue was bitcoin with 22% coming from Ethereum.
For the full year, the company sees 7 million to 9 million monthly transacting users and average transaction revenue per user in the low $20 range. It also slashed its costs by around $1 billion for the full year with less paid marketing and expenses.