Coinbase Stock Rises After Posting Its First Profit Since Q4 2021

Coinbase stock (NYSE: COIN) is trading sharply higher in US premarket price action today after the company shattered Q4 earnings estimates and posted its first quarterly profit since Q4 2021.

Coinbase reported revenues of $954 million in the quarter which were 51% higher YoY and significantly above the $826 million that analysts were expecting. Looking at the revenue breakup, Coinbase generated net consumer revenues of $492.5 million while institutional revenues were $36.7 million.

The company’s total subscription and services revenues also spiked to $375.4 million as compared to $282.8 million in the corresponding quarter last year.

Coinbase reported better-than-expected Q4 earnings

Coinbase reported net income of $273 million in Q4. It was the first time in two years that the company reported a net profit.

In its shareholder letter, Coinbase said, “In 2023, we saw our operational rigor pay off. We achieved our financial goal, launched new innovative products, strengthened our competitive position, and doubled down on our efforts to create momentum for a workable regulatory framework for crypto in the US.”

It added, “Beyond the numbers, we accelerated product velocity. We launched Coinbase International Exchange, eligible customers can now access derivative products through Coinbase Financial Markets, launched Base, and we acquired key licenses, registrations or launched operations in 6 new markets. We have improved our existing product suite and laid important foundations for future growth.”

Higher trading volumes fueled COIN’s earnings

Coinbase reported consumer trading volumes of $29 billion in Q4 as compared to $20 billion in the corresponding quarter last year. The institutional volumes were however flat at $125 billion.

During the earnings call, Coinbase CFO Alesia Haas said, “The increase in volatility had a meaningful impact on our transaction revenue. We saw strong growth and reengagement from both simple and advanced traders. Notable average trading volumes materially increased among our advanced traders.”

Robinhood also benefited from higher trading in cryptos

Notably, Robinhood also benefited from higher cryptocurrency trading in Q4. Robinhood’s net interest income rose 41% YoY to $236 million even as it fell from the Q3 high of $251 million. Robinhood’s transaction-based revenues which include revenues from trading of stocks, options, and cryptos rose 8% to $200 million.

The key driver of the rise in transaction-based revenues was cryptocurrency whose revenues rose 10% to $43 million and equity revenues which rose 19% YoY to $25 million.

Like Coinbase, Robinhood also reported a surprise profit in, Q4, and the stock soared after reporting the earnings.

Coinbase guidance

Coinbase said that it has generated around $320 million in transaction revenues this quarter until February 13 but said, “We continue to urge caution in extrapolating these results.”

The company expects subscription and services revenues to be between $410 million to $480 million in the first quarter.

In its shareholder letter, COIN said, “In 2024 Coinbase will focus on three main priorities. First, driving revenue through improving our core trading and USDC. Second, driving utility in crypto with experiments in payments using USDC and Base. Lastly, we will continue to drive regulatory clarity for the industry.”

Coinbase is also bullish on bitcoin ETF and CEO Brian Armstrong said during the earnings call, “We even played a key role in the approval of the Bitcoin ETF as Coinbase was selected as the custodian in 8 of 11. This will unlock new pools of capital to flow into the crypto space with Coinbase playing a key role here.”

He said that Coinbase is earning revenues not only from custody but from so financing and trading. Armstrong that bitcoin is the second largest ETF commodity in the US and has already overtaken silver.

COIN is pushing for regulatory clarity

COIN has been pushing for “regulatory clarity” over cryptocurrencies and it was among its top priorities for 2023. In its shareholder letter, it noted that 83% of G20 countries and financial hubs have made progress towards regulatory clarity.

It added, “We remain confident the US will get this right, whether it comes from the courts creating new case law, Congress passing new legislation, or ultimately the 52 million Americans that own crypto electing candidates who represent their values.”

During the earnings call, Armstrong said, “Coinbase has always taken a long-term approach focusing on building in a compliant manner even when it wasn’t the popular choice.”

He added, “Many of our competitors cut corners and broke laws to get big fast, and we’ve seen how that strategy played out. By contrast, Coinbase has now established itself as the trusted leader in crypto.”

How analysts reacted to COIN’s Q4 earnings?

Before Coinbase’s Q4 earnings, JPMorgan upgraded the stock from a “sell” to “neutral.” Reacting to COIN’s earnings, Oppenheimer analyst Owen Lau said, “Coinbase was widely perceived to be an unprofitable company, and this quarter can start changing the image going forward.”

Lau, who has an “outperform” rating on COIN added, “I think the next step is to see if Coinbase can maintain profitability for the full year.”

Cathie Wood Sold Some Coinbase Stock

Meanwhile, ahead of Coinbase’s Q4 earnings, ARK Invest which is run by Cathie Wood sold $34.3 million worth of COIN shares – its first stock sale in a month. Wood scooped up Coinbase shares early last year when the stock crashed and has since cashed out some stake.

However, ARK Invest still holds almost a 4.5% stake in Coinbase making it the company’s second biggest stockholder after Vanguard.

Coinbase stock has surged over the last year and looks set to continue its rally today looking at the premarket price action where it is up over 12%