Should You Add Coinbase (COIN) to Your Kitty Before Q1 Earnings?

2 May 2024

Yahoo Finance

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Should You Add Coinbase COIN to Your Kitty Before Q1 Earnings

Coinbase's (COIN) first-quarter results are likely to benefit from increased volatility, expansion of operations and a growing crypto economy.

Coinbase COIN is set to report first-quarter 2024 earnings on May 2, after market close. The Zacks Consensus Estimate for first-quarter earnings per share is pegged at 89 cents on revenues of $1.2 billion. The top- and bottom-line estimates imply year-over-year improvements of 493.3% and 55.5%, respectively.

Per our proven model, stocks with a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) are likely to beat on earnings. At present, Coinbase has an Earnings ESP of +36.53% and a Zacks Rank of 1. Hence, it is presumed that Coinbase is likely to beat estimates this earnings season.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Price Performance

Year to date, shares of Coinbase have rallied 17% against the industry’s 0.8% decrease. The Finance sector has risen 0.3% in the said time frame, while the Zacks S&P 500 composite has risen 6%.

Coinbase Global, Inc. Price and EPS Surprise

Coinbase Global, Inc. price-eps-surprise | Coinbase Global, Inc. Quote

Factors Acting in Favor

Coinbase, by virtue of the nature of its business operations, is poised to grow on heightened volatility.

Crypto trading remains a major revenue driver of COIN. Notably, over the last six years, derivatives trading constitutes the majority of crypto trading volume. Though Coinbase is a leader in spot trading in the United States, it launched derivatives trading globally last year. The company’s efforts to adapt to the changing trends is a positive.

Expansion of operations in Bermuda, Brazil, Canada, France, Singapore and Spain is expected to have driven growth. Most of the world's capital is held in institutions. Coinbase improved its institutional trading products with Coinbase Prime, grew institutional financing products, launched Coinbase Asset Management and also acted as a catalyst in the approval of Bitcoin ETFs in 2023.

Coinbase’s top priority remains its two largest revenue streams, trading fees and Stablecoins. Intensifying focus on international expansion, growing derivatives and spot trading and integration of USD Coin into the crypto economy should help it achieve its goal.

Subscription and services revenues are likely to have benefited from stablecoin revenues, interest income and blockchain rewards. Given an improved interest rate environment, the momentum is here to stay. Coinbase estimates first-quarter subscription and services revenues to be between $410 million and $480 million, with crypto prices being the largest driver.

Investments in technology to enhance operational efficiency and prudent expense management are likely to have lowered costs and improved margins.

Story continues

Headwinds

Coinbase's expansion in Bermuda, Brazil, Canada, France, Singapore and Spain could expose it to the economic as well as political conditions of the regions, which may impact its performance.

Also, results will be impacted owing to the highly volatile nature of crypto. With its top line being dependent on prices of crypto assets and volume of transactions, any downside in the contributors may drag down revenues. Also, cyber threats are a concern.

Bottom Line

Despite the headwinds, one can consider the stock, given its positive fundamentals as well as the evolving and growing crypto environment.

Other Stocks to Consider

Here are three securities and exchange stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Intercontinental Exchange ICE has an Earnings ESP of +0.54% and a Zacks Rank #2 at present. The Zacks Consensus Estimate for first-quarter 2024 earnings is pegged at $1.49, indicating a year-over-year increase of 5.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.

ICE’s earnings beat estimates in each of the last four reported quarters.

Cboe Global Markets CBOE has an Earnings ESP of +0.35% and a Zacks Rank of 3. The Zacks Consensus Estimate for first-quarter 2024 earnings is pegged at $2.04, indicating an increase of 7.4% from the year-ago reported figure.

CBOE earnings beat estimates in each of the last four reported quarters.

MarketAxess MKTX has an Earnings ESP of +0.75% and a Zacks Rank of 3. The Zacks Consensus Estimate for first-quarter 2024 earnings stands at $1.85, indicating a decrease of 5.6% from the year-ago reported figure.

MKTX earnings beat estimates in three of the last four reported quarters while missing in one.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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