Benefiting from the surge in the cryptocurrency market, Coinbase, the US cryptocurrency exchange, exceeded analysts’ expectations for fourth-quarter earnings and trading revenue.
According to FactSet data, Coinbase’s fourth-quarter earnings per share were $1.04, far higher than the predicted $0.02 by analysts. The company also reported revenue of $9.538 billion, surpassing the predicted $8.261 billion by analysts.
Anil Gupta, Vice President of Investor Relations at Coinbase, stated in an interview with CoinDesk that the cryptocurrency prices had been rising for most of 2023, but the anticipation for a Bitcoin spot ETF reignited people’s interest in digital assets, further strengthening the upward trend in the fourth quarter. This seemed to bring more business to Coinbase, with trading volume increasing by 100% in the fourth quarter compared to the third quarter, reaching $154 billion, higher than the expected $142.7 billion.
Gupta stated that the ETF was indeed a win-win situation for Coinbase, saying, “I think we have already begun to see that reflected on the platform.” The exchange provides custody services for 8 out of the 10 US Bitcoin spot ETFs, making it a significant participant in this business.
Coinbase also announced an adjusted EBITDA of $964 million for 2023, previously predicting positive adjusted EBITDA for the year. The company expects to generate approximately $410 million to $480 million in subscription and service revenue in the first quarter of 2024, with profits of around $320 million already achieved by February 13.
After rising by approximately 3% during regular trading hours, Coinbase’s stock price (COIN) surged over 14% in after-hours trading to $189.36.
JPMorgan raises Coinbase stock rating
According to CoinDesk, prior to Coinbase’s earnings announcement, JPMorgan raised its rating on the exchange’s stock from underweight to neutral, reflecting the recent surge in cryptocurrency prices following the approval of the US Bitcoin spot ETF. The target price remains unchanged at $80.
JPMorgan stated in its report that higher cryptocurrency prices are expected to improve activity levels and profitability for Coinbase in the first quarter. Analysts stated that the approval of the Bitcoin spot ETF initially triggered a “sell-the-news” event but has now shifted to a meaningful Bitcoin rally.
However, the investment bank cautioned that after a nearly 400% increase in stock price last year, based on its valuation analysis, Coinbase’s stock price may underperform in 2024.
The report added:
