Coinbase Global’s
stock rallied in after-hours trading Thursday as the crypto-trading platform reported first-quarter financial results that far exceeded analysts’ expectations.
Coinbase shares were up 7.8% to $53 near 6:30 p.m. Eastern time.
Coinbase reported a first-quarter loss of 34 cents a share on revenue of $773 million, a big improvement from the end of 2022, when the trading platform posted a $2.46 per-share quarterly loss from $629 million in revenue. Analysts surveyed by FactSet had expected the firm to report a loss of $1.45 per share on revenue of $655 million.
The trading platform’s performance has been bolstered by
Bitcoin’s
big rally this year even as analysts cast a wary eye at percolating regulatory battles with the U.S. Securities and Exchange Commission. The SEC has warned Coinbase that it might sue the firm for violating securities laws.
In a letter to shareholders, Coinbase executives attributed the improved earnings in part to heavy cost cutting at the firm. The firm said that total operating expenses declined 24% from the prior quarter.
The company’s technology and development and general and administrative expenses in the first quarter were lower than Coinbase had told investors to expect in February. And its subscription and services revenue, which includes interest earned through a partnership on the USDC stablecoin, came in higher.
The company said it expects expenses to increase modestly due to factors like higher spending on marketing and legal services.
Despite efforts to diversify into subscription and services businesses, the price of Bitcoin remains key for Coinbase, Its financials were also boosted by the rise in crypto assets in the last quarter. With its core customer base remaining U.S. retail investors, Coinbase is sensitive to bull and bear market dynamics, because this cohort of traders tends to pile in when prices are rising and flee when prices are falling.
Analysts see continuing challenges.
“We expect the knee-jerk, sigh-of-relief positive trade to fade,” Dan Dolev, an analyst at Mizuho Securities, wrote in a note on Thursday after the earnings release. In an earlier note on Wednesday, Mizuho, which rates Coinbase at Underperform, cut its price target on the stock to $27 from $30.
Coinbase is increasingly reliant on “riskier revenue sources” like trading in small crypto tokens and yield-based products, Dolev wrote, which are both areas that the SEC has put under a microscope.
The digital asset space at large has come under intense U.S. regulatory scrutiny over the past year, and Coinbase hasn’t been exempt.
Coinbase disclosed in March that the SEC had sent it a so-called Wells notice, a warning that the agency may sue the exchange. Coinbase said it was confident in the legality of its assets and services, but has since flagged that it would consider pushing offshore if U.S. regulatory clarity doesn’t improve. This week, the company launched Coinbase International Exchange, a bid to push into the lucrative crypto derivatives market with a platform regulated out of Bermuda.
“As it stands, both long and short debates begin and end with Coinbase’s regulatory predicament,” Peter Christiansen, an analyst at Citi, wrote in a Monday note while downgrading Coinbase to Neutral/High Risk with a price target lowered to $65 from $80. “Until the regulatory ‘rules of the road’ are better established in the U.S., the stock will remain weighed down by this high level of uncertainty.”
Write to Joe Light at [email protected] and Jack Denton at [email protected]
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