- Coinbase turned a profit in the fourth quarter of 2023, its first in two years.
- JPMorgan, KBW, Oppenheimer, and Needham all changed their recommendations for the stock.
- Trading volumes soared as users returned to the platform to trade on increased volatility.
Coinbase posted its first profit in two years, prompting Wall Street to move price targets higher and upgrade the stock’s outlook.
The crypto exchange’s fourth-quarter earnings report, which doesn’t reflect January’s launch of spot Bitcoin ETFs from BlackRock, Fidelity, and other fund giants, surprised research analysts with better-than-expected revenue.
Back in black
Coinbase smashed targets with net income of $273 million in the fourth quarter, well above analysts consensus estimates of $103 million.
Investment bank analysts took note, with at least four firms scrapping previous outlooks.
JPMorgan upgraded its rating for Coinbase to neutral from underweight following earnings. While investment bank Keefe, Bruyette and Woods upgraded Coinbase to market perform from underperform.
Other investment banks were more optimistic. Oppenheimer upgraded its recommendation on Coinbase to outperform from perform.
Needham hiked its price target for Coinbase to $220 from $160 on Friday. The change was based on higher returns from staking services and increased trading revenue for 2024.
Coinbase posted revenue of $954 million for the quarter. Above Needham’s estimates of $948 — about 15% higher than Wall Street analysts consensus of $826 million.
Shares in the crypto exchange rose to a two-year high of $190 on Friday before closing at $180 — marking a 21% increase from Monday. US markets are closed today for President’s day.
Revenue roundup
Not all analysts were convinced, though.
Analysts at investment bank Mizuho maintained a recommendation of underperform on the stock.
Altcoins and staking made up 42% of revenue, which was a record high and a marked increase from 31% in the third quarter of 2023, Mizuho said.
Coinbase disappointed in key areas, however, Mizuho said in a note on Thursday.
Since Coinbase doesn’t share a clear breakdown of its trading fees, analysts at Mizuho use the so-called retail take rate. This divides transaction revenue by trading volume to get a better idea of how much money the exchange made on trades.
That rate — essentially the average fee it charges clients to trade — fell to 1.7% in the fourth quarter.
Needham attributed the lower retail take rate to higher volatility during the quarter, which resulted in a greater number of “advanced trading” users.
More retail traders used the exchange’s technical trading platform to trade with lower fees, argued Needham, versus simple retail users.
The revenue beat was driven by altcoins and staking, or “lower-quality” areas, Mizuho said.
Crypto market movers
- Bitcoin rose 0.5% to $52,000 on Monday.
- Ethereum added over 4% since Sunday, rising above $2,900.
What we’re reading
- Angry Texans fight Bitcoin mine’s 80,000 noisy machines in test for industry — DL News
- Bots are invading a16z-backed crypto hit Farcaster — its open-source design may be a solution — DL News
- Crypto’s Earnings Are In… — Milk Road
- Revolut Building Dedicated Crypto Exchange For Advanced Traders — Milk Road
