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Coinbase (NASDAQ: COIN), which is the world’s second-largest cryptocurrency trading platform, announced its quarterly results earlier this week and reported revenue of $629 million and an adjusted loss of $2.46 per share. Wall Street analysts forecast Coinbase to report revenue of $590 million and a loss of $2.55 per share in the December quarter.
Despite its revenue and earnings beat, COIN stock is trading lower in the early market on Wednesday as it missed user number projections in Q4 while its sales fell 75% year over year. Its GAAP net loss also stood at $557 million compared to a net income of $840 million in Q4 of 2021.
Moreover, Coinbase’s user base has shrunk to 8.3 million MTUs or monthly transacting users in Q4 from 8.5 million MTUs in the year-ago quarter. Analysts forecast the company to report MTUs of 8.22 million. Its trading volume also fell 9% year over year to $145 billion, while transaction sales were down 12% at $322 million. Analysts forecast transaction revenue at $327 million in the quarter.
Let’s see what the company expects in 2023.
Will COIN stock gain momentum in 2023?
In Q1 of 2023, Coinbase forecasts subscription and services revenue between $300 million and $325 million, while restructuring expenses are projected at $140 million. The company is looking to diversify its revenue streams as trading activity has fallen off a cliff in the last year. It is now looking to gain traction across products such as Staking, Earn, and Custody which brought in sales of more than $200 million in Q4, accounting for 30% of total revenue.
Similar to most other tech companies, Coinbase has lowered its operating costs in recent months due to a challenging macro-environment. It has announced two rounds of layoffs since last June to reduce its cash burn.
The sell-off in COIN stock drove it lower by more than 86% in 2022. It has, however, surged 75% in 2023 but is still down 80% from all-time highs. Bitcoin prices have gained 48% year-to-date, which has translated to impressive gains in COIN stock.
The market conditions for Coinbase have improved in the first seven weeks of 2023, allowing the company to earn $120 million in transaction fees in January. Coinbase explained, “We’re seeing what we’ve seen always in crypto. It’s overall volatility and market conditions that drive trading activity and...these idiosyncratic events have changed that longer-term dynamic that we’ve seen.”
What next for Coinbase stock price and investors?
In 2023, Coinbase may be impacted by SEC actions as the latter is likely to increase regulations in the crypto space. In the last few days, crypto exchange Kraken ended staking services as it allegedly sold unregistered securities on its platform.
Several crypto exchanges offer customers the option to stake their digital assets and earn a yield on cryptocurrencies. So, investors vault their cryptos with a blockchain validator, and the latter verifies the accuracy of these transactions.
Coinbase has, however, maintained that its staking product is not a security. This product currently accounts for 3% of sales but is an important part of the company’s ecosystem.
Valued at a market cap of $17.2 billion, Coinbase increased its revenue from $533.7 million in 2019 to $7.8 billion in 2021. It is evident that the performance of COIN stock is closely related to the price of cryptocurrencies such as Bitcoin and Ethereum.
In case you are bullish on the long-term prospects of cryptocurrencies, you can buy COIN stock which is currently trading at a discount of 20% to consensus price target estimates.
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