Coinbase’s 2Q earnings preview: Another blowout quarter expected

Article written by Yeap Jun Rong - Market Strategist Singapore

When does Coinbase Inc report earnings?

Coinbase is set to release its quarter two (Q2) 2024 financial results on 1 August 2024, after the US market closes.

Coinbase’s 2Q 2024 results – what to expect

Expectations are for Coinbase’s Q2 revenue to almost double to US$1.4 billion, up from the previous US$708 million. This will be the fourth straight quarter of positive revenue growth , which will be once again supported by a more than twofold increase in its transaction revenue from a year ago.

Earnings per share is expected to come in at US$0.94. This will mark the third straight quarter of profitability, extending its continued turnaround from its losses a year ago.

Traction in crypto market may be supported by ongoing fund launches

With the rapid growth of spot Bitcoin exchange-traded funds (ETFs) since the US Securities and Exchange Commission (SEC) approval at the start of the year, more fund launches may continue to underpin traction for the crypto market. Year-to-date, Bitcoin and Ethereum prices have stayed resilient, up 54% and 43% respectively, reflecting strong underlying demand. Both account for the bulk of Coinbase’s transaction revenue.

The recent SEC approval of Ethereum ETFs in July also marked another significant milestone for the crypto space, reflecting further expansion of crypto products as the ongoing direction. A look at the Crypto Fear & Greed index showed some dampening in optimism in June this year, but sentiments were quick to rebound into July, seemingly setting the stage for bullish sentiments to persist.

Crypto space may be more sensitive to odds of Trump’s presidency

Traction in the cryptocurrencies space may now be also tied to the odds of a Trump presidency, with the Republican nominee recently announcing plans to establish a presidential advisory council on cryptocurrency, create a national "stockpile" of Bitcoin and make the US a ‘Bitcoin superpower’.

His stance points to potential easing in regulations for the cryptocurrency sector and an uplift in demand upon his successful election, which is well-received by the crypto community. With that, any higher odds of a Trump presidency could see further traction for the crypto space, which could be beneficial for Coinbase.

Forward guidance in focus, with expectations for growth momentum to continue through rest of 2024

Refinitiv estimates suggest that expectations are for Coinbase’s growth momentum to continue through the rest of 2024, which will leave any positive tone from management guidance on watch for validation.

Its subscription and services revenue is expected to remain resilient from higher stable coin revenue and blockchain rewards revenue. Its institutional share remains in focus, with its earlier move to reduce fees aggressively for high-volume traders. 1Q 2024 witnessed a more than two-fold jump in its institutional revenue, but it could be tied to strong traction following the approval of Bitcoin ETFs. The degree of any taper-off ahead may offer greater clarity on the success of its fee-reduction plan.

Technical analysis – Coinbase’s share price trading on near-term higher lows

Since February this year, Coinbase’s share price has been trading within a broader ranging pattern, with base support at the US$193.60 level while upper resistance may be found at the US$272.90 level. Near-term, an ascending channel formation may seem to be in place, with a trendline connecting higher lows leaving immediate support at the US$224.68 level on watch.

Failure to defend this level may pave the way for a retest of the US$193.60 level. On the upside, Coinbase’s share price has rejected the US$272.90 on two occasions since June 2024, leaving it as a crucial level for buyers to overcome. For now, buyers seem to be largely holding on, with its daily moving average convergence/divergence (MACD) forming higher lows and share price trading above various moving averages (MA).