In a remarkable after-hours rally, Coinbase stock jumps on big earnings, more than 14% following the crypto exchange’s stellar fourth-quarter earnings report, surpassing Wall Street predictions. The surge was propelled by robust transaction volumes and optimistic expectations tied to the approval of spot Bitcoin ETFs, coupled with a positive economic outlook for 2024.
JPMorgan analyst Kenneth Worthington, who had previously downgraded Coinbase in January, changed course and upgraded the stock rating from underweight to neutral. The reversal was attributed to the positive impact of Bitcoin exchange-traded funds (ETFs) on the crypto markets. Worthington highlighted the accelerated inflow into Bitcoin ETFs and the notable price appreciation of both Bitcoin and Ethereum.
In a note to clients on February 15, Worthington stated, “We are returning to a Neutral rating on Coinbase as we see the higher cryptocurrency prices not only sustaining but improving activity levels and Coinbase’s earnings power as we look to 1Q24.”
Bitcoin ETFs amassed over $10 billion in assets under management within their first month, surpassing expectations. Coinbase’s custody arm has partnered with several asset managers launching Bitcoin ETFs, expecting to generate fees ranging between $25 million and $30 million.
Despite the positive momentum, some challenges loom for Coinbase. The exchange may not turn profitable this year, with a negative operating income margin of -55.53%, as indicated by an analysis from InvestingPro. Legal issues with the U.S. Securities and Exchange Commission (SEC), which sued Coinbase in June 2023 for allegedly offering unregistered securities, add another layer of complexity.
Earnings Exceed Expectations
The stock of Coinbase, the leading U.S. cryptocurrency exchange, jumps on big earnings. Coinbase reported adjusted earnings of $1.04 per share for Q4, a stark contrast to the $2.46 per share loss in the same period the previous year. Analysts had forecasted a mere 2 cents per share. Total revenue reached almost $954 million, marking a 41% sequential growth and outpacing the consensus estimate of $826 million.
Transaction Revenue Boost
Quarterly results received a substantial boost from a remarkable 64% year-on-year growth in transaction revenue. The surge was attributed to the buzz surrounding the approval of spot Bitcoin ETFs and optimistic sentiments regarding improving macroeconomic conditions in 2024.
Outlook and Projections
Looking ahead, Coinbase anticipates first-quarter subscription and services revenue to range between $410 million and $480 million, surpassing the Street estimate of $356.22 million. The company dispelled concerns about market share erosion amid rising competition from competitors like Robinhood Markets and Fidelity Investments.
Coinbase’s Vice President of Investor Relations, Anil Gupta, addressed worries about fee compression, stating, “Candidly, I think the worries about fee compression have been happening for years, and we haven’t seen it.” The company showcased impressive trading volumes, hitting $154 billion in Q4, exceeding both the previous quarter and analysts’ projections.
Chart Analysis and Resistance Ahead
Since its late December 2022 low, Coinbase shares have maintained an ascending channel, displaying resilience amid market fluctuations. Recent trends suggest a growing bullish momentum, with buyers defending a pullback to the 50-day moving average.
Investors are advised to keep a close eye on the upper trendline of the ascending channel, currently positioned around $210. This level could serve as a key area for profit-taking, especially in light of the recent earnings-driven price surge.
Coinbase’s Bullish Momentum
The news that Coinbase stock jumps on big earnings underscores its resilience in the face of market challenges. The company’s strategic positioning, coupled with growing transaction volumes and positive market sentiments, has fueled a significant surge in its stock value. As Coinbase continues to navigate the dynamic crypto landscape, investors are cautiously optimistic about its future prospects.
Also Read: Ricardo Salinas: Mexican Billionaire Outlines 4 Key Reasons to Buy Bitcoin.
