Coinbase Faces Q1 Earnings Challenge as Crypto Markets Weaken

Cryptocurrency exchange Coinbase Global, Inc. (COIN) will continue to face headwinds as the company is set to report first quarter earnings on Tuesday after the market close.

Coinbase already warned investors during its fourth quarter earnings report that it's expecting lower trading volumes and monthly transacting users given a drop in crypto asset volatility and macroeconomic factors. As a result, Wall Street analysts have mostly reduced their earnings and volume estimates heading into Tuesday’s release.

According to FactSet, the consensus analyst estimate for Coinbase’s first quarter is for $1.5 billion in revenues and an adjusted earnings loss of one cent per share.

“Despite the downturn in crypto activity, [the first quarter] was marked by few sudden price swings which can lead to higher volumes on increased volatility,” John Todaro, an equity research analyst with investment bank Needham & Co., said in a note to clients. “The period was instead marked by a steady, continuing decline with periods of range-bound markets leading to relatively muted volumes.”

Todaro is expecting overall trading volumes of $322 billion in the first quarter, down from his previous estimate of $355 billion. He maintained a buy recommendation on the stock.

The start of the second quarter also hasn’t inspired analysts, and some anticipate more headwinds from Coinbase’s outlook.

“Average daily trading volumes on COIN have averaged $2.3 billion thus far in 2Q, approximately 30% below 1Q levels,” Dan Dolev, an equity research analyst at Mizuho told clients in a note earlier this week. “On a full-quarter basis, this would imply about $210-215 billion of volumes for 2Q.”

Dolev says consensus revenue expectations for Q2 are “too optimistic,” and maintains a neutral rating on Coinbase’s shares.

Coinbase’s non-fungible token (NFT) segment will garner some attention as investors will get a look at its early days and engagement with users. The company recently launched its beta version, which showed low usage stats.

Still, some remain upbeat that Coinbase’s NFT segment will help make the company a one-stop shop for mainstream crypto adoption.

“The NFT move also underscores our ongoing view that perhaps the ‘most boring’ part of the COIN investment case at this point is the spot price of bitcoin and that the future for this innovative company is materially broader and wider than just the leading digital asset and its associated trading volumes,” Canaccord Genuity analyst Joe Vafi told clients in a note near the end of April.

Coinbase shares have fallen almost 60% this year while the broader equity markets and the Nasdaq continue to retreat, with the Nasdaq falling about 22%. Meanwhile, the price of bitcoin (BTC) has fallen about 26% during the same period.

Read more: Coinbase NFT Marketplace Goes Live. Can It Rival OpenSea?