Coinbase Global (COIN) Drifts Lower on Underwhelming Q1 Results As Crypto Prices Continue To Slide
1:02 pm Wednesday, May 11th, 2022
As the crypto market continues to slide, led by Bitcoin, Coinbase Global (COIN) shares remain stuck in a downward trend, now having given up nearly 80% on the year and 50% in May alone. Although the cryptocurrency exchange platform benefits from heightened volatility, as it derives revenue from both sides of a trade, it thrives when the crypto market is rocketing toward new highs, as was the case during November 2021. That action tends to attract many additional users to trade on its platform. COIN also takes a higher fee on buy orders.
Adding to the impact of a significant pullback in crypto prices is a general bearish sentiment toward tech stocks and riskier asset classes. This magnifies COIN’s decline, as COIN falls under the tech stock category, and as Bitcoin is considered a risky asset class. Another factor weighing on COIN’s tumble today is the mixed securities shelf offering it filed yesterday after the close.
After a year of positive adjusted earnings, COIN started off FY22 with EPS in the red at $(1.26), missing analyst expectations by a sizable margin. Revenues also fell well short of consensus, declining 35.2% yr/yr to $1.17 bln. T
wo closely tracked metrics, total trading volume and monthly transaction users (MTUs), declined sequentially by 43.5% and 2.2%, respectively.
Total trading volume of $309 bln in Q1 was also a 7.8% drop from the year-ago period. However, this may have been expected, since Bitcoin continuously set new record highs during 1Q21.
However, this minor bright spot is being crowded out by COIN’s somewhat bearish near-term guidance. The company expects MTUs and total trading volume to continue to drift lower sequentially in Q2, as April already saw around 8.9 mln MTUs and just $74 bln in trading volume (Q1 averaged $103 bln each month).
Bottom line, as the Federal Reserve looks to shrink its balance sheets and raise interest rates, risker asset classes like Bitcoin could be in for a tumultuous year, hindering COIN’s growth profile. Still, COIN is doubling down on its diversification strategy through other subscriptions and services, which grew 169% yr/yr in Q1, and doing so has positioned it to offset some of the volatility in the crypto markets. Just like a bear market in crypto amplifies COIN’s decline, on the flip side, a bull market can catapult the stock to new highs quickly.
