Coinbase Global, Inc. (NASDAQ: $COIN) is a major crypto exchange that offers users a secure online platform to trade, transfer, and store cryptocurrencies. Coinbase’s mission is to become the leading global platform for the conversion of crypto into local currencies.
On Thursday, February 15, after markets closed, Coinbase released its fourth quarter fiscal 2023 results to a positive market reception.
Coinbase Releases Market Beating Q4 Results
Coinbase results for the fourth quarter came in above expectations as the speculation about spot Bitcoin ETFs boosted trading on the crypto exchange. Revenue in the quarter came in at $953.8 million, a massive increase from the $629.1 million recorded last year. Q4 revenue surged 41% Q/Q and was above analysts’ expectations of $862 million.
Broken down by source, transaction revenue in the quarter surged 83% Q/Q to $529 million, while subscription and services revenue grew 12% Q/Q to $375 million. The rise in transaction revenue was driven by a rebound in trading volume, which surged to $154 billion, compared to $145 billion in Q422.
In Q4, Coinbase recorded an EPS of $1.04, compared to -$2.46 in Q422, and better than the analysts’ expectation of $0.01. For the quarter, the company earned a profit of $273 million, compared to a $557 million net loss in Q422. This was the company’s first positive quarterly EPS since the fourth quarter of 2021, during the last major crypto bull run.
The fourth quarter surge helped Coinbase record a $95 full-year net profit, compared to a $2.6 billion net loss in fiscal 2022. Full-year net revenue came in at $3.1 billion, a 3% decline from the $3.2 billion in fiscal 2022.
Adjusted EBITDA in the quarter surged 69% Q/Q to $305 million, while full-year adjusted EBITDA came in at $964 million, compared to a -$371 million in FY22. The company’s balance sheet improved in fiscal 2023, as it reduced its debt by $413 million or 12%, while USD resources increased by $217 million to $5.7 billion.
Bitcoin ETF Speculation Triggers Surprise Rally
Coinbase’s fourth-quarter performance was driven by speculation regarding the approval of spot Bitcoin ETFs by the SEC. At the end of the year, many analysts were forecasting that the SEC would approve a spot Bitcoin ETF early in 2024.
The Bitcoin ETF would lead to an inflow of institutional money in the crypto world without having direct exposure to Bitcoin. Additionally, it would boost mainstream acceptance of crypto. In January, the SEC approved 11 Bitcoin ETFs, with Coinbase being a custodian for eight of them.
Since the approval, Bitcoin has surged above the $52K mark, which is the highest it has been since 2021. However, it is still below the all-time high of over $68K in 2021. At the time, it benefited immensely from low interest rates and a stimulus package that put money in the hands of investors.
Coinbase Q1 and Fiscal 2024 Outlook
In its outlook section, Coinbase stated that it had generated around $320 million in transaction revenue as of February 13, which is around the midpoint of Q1. However, it called for caution in extrapolating the results.
The exchange anticipates subscription and services revenue of $410-$480 million in Q1. It foresees transaction expense in the mid-teens of net revenue. Additionally, Coinbase forecasts technology, development, and general expenses of $600-$650 million and sales and marketing expenses of $85-$100 million.
For the full year 2024, Coinbase foresees growth in institutional financing products, which will increase loans receivable while reducing cash on their balance sheet. However, these loans are short-term and fully collateralized. The company also anticipates continued volatility in its effective tax rate.
Coinbase Stock Performance
During pre-market trading on Friday, February 16, 2024, after the results came out, Coinbase stock was up over 15%, trading at $191.10 per share. During its last trading session, Coinbase closed 3.30% higher at $165.67 per share.
The current pre-market price has pushed the stock above its highest point since April 1, 2022, when the stock was trading at $189.33 per share. However, it is still below its April 2021 IPO price of $225. Nevertheless, the stock has benefited immensely from the launch of the Bitcoin ETF, which has triggered a rise in the price of Bitcoin and other cryptocurrencies.
Coinbase Stock Forecast
As of Thursday, February 15, 2024, stock analysts had an overall hold rating for COIN stock. They forecast a high of $200 and a low of $60 for the stock. Their average price target was $133.20, a 19.60% downside. However, some analysts will likely adjust their forecast after the recent results and guidance from Coinbase.
The Case for Coinbase
The performance of the Coinbase stock is correlated with the performance of the crypto industry. In 2024, the crypto sector is poised for a bull run, having overcome most major hurdles in 2022, with the conviction of FTX founder SBF.
However, the exchange still faces challenges, such as the ongoing legal battle with the SEC. In the lawsuit, the SEC accuses Coinbase of offering unregistered securities. Coinbase has opted to defend itself in court, and its CEO, Brian Armstrong, has been vocal about his opposition to the lawsuit. Coinbase is also actively lobbying Congress for clarity on crypto regulation.
In an earnings call with analysts, Armstrong stated, “We remain confident the U.S. will get this right, whether it comes from the courts, creating new case law, Congress passing new legislation or ultimately the 52 million Americans who’ve used crypto voting in this upcoming election.”
He added, “Crypto still needs to have its iPhone moment where these decentralized protocols become easy to use for the average person, and we’re hoping we can help make that happen.”
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