Earnings season: Coinbase rides crypto volatility all the way to the bank

Cryptocurrency exchange Coinbase sees profits surge this quarter following a period of high volatility in crypto markets.

Coinbase earnings

Coinbase’s headline stats

Q2 was a very solid quarter for Coinbase this earnings season. The current crypto market volatility played into the exchange’s hands as it record Wall Street-beating estimates.

Here are Coinbase’s key stats for this earnings season:

• Revenue -$2.23 billion vs. $1.78 billion expected
• Earnings – $3.45 per share vs. $2.33 expected

Note: the EPS figure excludes stock-based shareholder compensation.

Coinbase profits soared 4,900% year-on-year with net profit totalling $1.6bn. While volatility may not suit traders, it’s certainly paid off big time for Coinbase.

The exchange’s profitability and economic health essentially rely on the price of Bitcoin. The world’s most popular digital token, and the biggest by value, did have a torrid time last quarter. Prices fell 41% in that time.

Despite this, a flurry of trading took place, which explains the hefty revenues Coinbase generated. $1.9bn of its total revenues stemmed from transaction fees last quarter. A further $100m came from subscription-related services.

Bitcoin is still the most popularly traded token on the Coinbase exchange. However, volumes had dropped quarter-on-quarter. In Q1, Bitcoin made up 36% of all transactions. This had dropped to 24% as of Q2 2021.

Other coins, notably Ethereum, have started to eat into Bitcoin’s market share.

Looking to the future, Coinbase offered no formal guidance but did indicate that trading volumes are likely to be smaller in Q3.

Coinbase share price action

At the time of writing, Coinbase shares are up roughly 7%, building on the 2.1% gains made when the exchange posted its results on Tuesday afternoon.

That’s interesting. Even some of the biggest tech-related firms like Apple posted strong quarters, but still their stock price drop after reporting.

The analyst consensus appears strongly in favour of Coinbase. 78.6% give the stock a Buy rating.

In terms of price targets, Coinbase could offer upsides of up to 38%.

Analysts would suggest the stock is undervalued. It’s currently trading at $291.5, though the price target is as high as $370.64.

Coinbase is down about 29% since it went public in April. At that time, Coinbase opened at $381 per share. Its valuation of $100bn was a bit of a landmark in terms of cryptocurrency legitimacy.