Coinbase Fluctuates With Revenue Just Below Estimates

(Bloomberg) -- Coinbase Global Inc. shares fluctuated in post-market trading Thursday after the biggest U.S. cryptocurrency exchange reported net income above Wall Street estimates.

Coinbase reported total sales of $1.8 billion, in line with its April guidance but slightly below $1.81 billion analysts polled by Bloomberg expected. The company’s net income of $771 million fell into the middle of guidance range of $730 million to $800 million, and exceeded analysts’ expectations of $762.6 million.

Coinbase reported a day after Tesla Inc. said it will stop accepting Bitcoin for payment, leading the world’s biggest cryptocurrency to crash to below $50,000. Coinbase Chief Financial Officer Alesia Haas said in an interview the steep drop “is just one day. It’s important we don’t over-index on one day.”

Coinbase shares first fell past $250 in after-hours trading, briefly breaching the reference price set by Nasdaq for its direct listing on April 14. No trades ever went off at that price -- it debuted at $381 -- but going below it is viewed as a blemish for the listing.

“Coinbase’s strong 2Q21 trading volume guidance - equal or better than the enormous $335bn it posted in 1Q21 - and its boosted 2021 scenarios for monthly transacting users were the key takeaways, in our view,” said Mark Palmer, an analyst at BTIG. “However, the market seems to have initially focused on modest “misses” on consensus estimates even though the company either hit its pre-announced figure (in the case of revenue) or produced results within the pre-announced range (in the case of net income).”

While Coinbase’s shareholder letter didn’t comment on the crash, the company emphasized once again that its business “is inherently unpredictable.” It added that “the wind is in our sails right now, and it feels good,” it added. “But crypto is a young volatile industry and there will come a day when times are harder.”

The company increased its expectations for the full-year for monthly transacting users, as the number of such customers rose to 6.1 million in the first quarter, more than double the prior quarter. In the current, second quarter, the company expects its total trading volume to meet or slightly exceed its first-quarter trading volume.

But investors shouldn’t expect major profits going forward, the company said. “We seek to operate the company at roughly break even in terms of profitability, smoothed out over time, for the time being,” the company said, explaining that it focuses on expansion. It plans to “substantially” increase marketing this year, with investments in sales and marketing adding up to between 12% and 15% of revenue.

Coinbase ended the quarter with nearly $2 billion in cash and equivalents, and it’s expects to remain acquisitive, likely making bigger acquisitions than in the past, as many crypto startups have grown, Haas said. Coinbase acquired a number of companies recently, including analytics platform Skew.

Coinbase also plans to add features to its app, allowing for easy NFT trading, for instance. And it’s exploring new services. Most of the company’s revenue comes from retail users, even though institutions account for most in assets it holds under management. Coinbase is trying to bring in institutional money in order to later offer more services to larger customers, Haas said.

Coinbase pointed to rising competition as a risk factor. “Our competitors are supporting certain crypto assets that are experiencing large trading volume and growth in market capitalization that we do not currently support, as well as offering new products and services that we do not offer,” the company said in the letter. “We welcome these challenges as they indicate that the market we serve is growing rapidly, but we also have to continue to move quickly to address them, and that inspires us towards action and growth.”

Coinbase’s stock is down about 20% since the company’s April trading debut via a direct listing.

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