| Author | Message | ||
     Entrepreneur Kurra Bewarse Username: Entrepreneur Post Number: 3547 Registered: 05-2011 Posted From: 65.35.45.47 Rating: N/A |
COIN Coinbase trades roughly flat today after issuing its first earnings report since its April IPO (264.98 -0.12) Coinbase (COIN) is trading roughly flat today after issuing its first earnings report since going public in April. The stock has lost about 40% since its IPO opening, correlating closely to the price action of Bitcoin, the number one cryptocurrency by market cap. Coinbase's correlation with Bitcoin is probably not surprising, given that the company derives 96% of net revenue through cryptocurrency transaction fees. Correlation to the crypto market is a double-edged sword for Coinbase. On the one hand, investors can get a piece of the crypto market without buying any cryptocurrencies through Coinbase stock. However, the stock's close ties to the crypto market also makes it susceptible to similar volatility. Turning to Q1 earnings, revenue jumped 840% yr/yr to $1.80 bln, which was generally in-line with consensus. However, since Bitcoin also rose about 800% in that same period, more noteworthy is Coinbase's Q1 adjusted EBITDA jumping 1,900% yr/yr to $1.12 bln, slightly above the $1.10 bln consensus. Also, verified users increased 65% yr/yr to 56 mln. Monthly transacting users, or MTUs, for Q1 was 6.1 mln, a 369% increase yr/yr. This metric is important for gauging cryptocurrency market cap and price volatility. If MTUs remain above 5.5 mln for the year, Coinbase predicts this will indicate an increase in market cap and moderate to high price volatility. Looking ahead to Q2, Coinbase did not provide specific revenue or earnings guidance. The lack of guidance is not surprising given the volatile nature of the broader crypto market. This makes it challenging to forecast quarter to quarter. However, COIN does say that quarter to date, it has seen "continuance of the strong crypto price cycle with high prices of many crypto assets, high levels of volatility and high interest in crypto across retail and institutional users." In sum, the muted reaction today seems related to COIN generally reporting Q1 results in-line with expectations. We think investors should use some caution with COIN. There was a lot of excitement initially with COIN as IPO opened at $381 in mid-April. However, Bitcoin prices have come under pressure, which has dragged COIN down along with it. Also, cryptocurrency price fluctuations are significantly tied to the decisions of individual companies. For example, in March, Tesla (TSLA) announced that it would accept Bitcoin as payment for its vehicles, causing Bitcoin to soar, only for the company to announce this week that it is reversing its decision. Not surprisingly, Bitcoin subsequently tumbled. With 60% of Coinbase's trading volume coming from two cryptocurrencies (Bitcoin and Ethereum), we expect Coinbase to remain highly volatile through 2021. On a final note, no matter how one views the future of cryptocurrency, we think few can argue that its users need a place to store and exchange it. Despite near-term volatility, Coinbase is the leader in this market, and we like its leadership position and growth outlook moving forward. |