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COIN shares hot two-year highs as cryptocurrency bulls return in Q4

AInvestFriday, Feb 16, 2024 9:19 am ET
3min read

Coinbase Global, the largest U.S. cryptocurrency exchange, announced its Q4 earnings report, which showed a significant increase in transaction revenue, subscription and services revenue, and other revenue. The company reported a net income of $273 million, which was a substantial improvement compared to the previous year. This marked Coinbase's first quarterly profit in two years, signaling a potential turning point for the company.

The Q4 results exceeded analyst expectations, with the company reporting a profit of $1.04 per share, compared to the estimated $0.02 per share. The company's Q4 total revenue was $954 million, which represented a 41% increase compared to the previous quarter. Net revenue was $905 million, up 45% Q/Q, while other revenue was $49 million, down 4% Q/Q. The company's total operating expenses were $838 million, up 11% Q/Q.

Coinbase's Q4 transaction revenue was $529 million, which was a 64% increase compared to the previous quarter. The primary drivers of this growth were an increase in consumer trading volume and institutional trading volume. The company's Q4 subscription and services revenue was $375 million, which was a 12% increase compared to the previous quarter.

The company's Q4 stablecoin revenue was $172 million, which was essentially flat compared to the previous quarter. This was due to a full-quarter of the company's economics related to its updated arrangement with Circle, which it announced in August 2023, and higher on-platform balances, offset by lower USDC market capitalization.

Coinbase's Q4 blockchain rewards revenue was $95 million, which was a 28% increase compared to the previous quarter. The primary drivers of this growth were higher crypto asset prices and continued growth in staked balances. As of December 31, 2023, approximately $9.4 billion in assets were held on behalf of individual consumers staked through the platform, and over $7.4 billion in assets were staked by institutional customers through Coinbase Prime.

Coinbase's Q4 subscription and services revenue outperformed expectations, coming in at $375 million, compared to the projected range of $355 million to $400 million. The company's transaction expenses were in the mid-teens as a percentage of net revenue, in line with expectations. The company's technology and development, as well as general and administrative expenses, exceeded expectations, totaling $604 million, including $151 million in stock-based compensation. The company's sales and marketing expenses also exceeded expectations, coming in at $106 million, including $13 million in stock-based compensation.

Coinbase reported that its Q4 consumer transaction revenue was $493 million, which represented a 79% increase compared to the previous quarter. The company attributed this growth to an increase in trading volumes, both in terms of existing users trading at higher volumes and an increase in the number of users actively trading.

The company's Q4 consumer trading volume was $29 billion, which represented a 164% increase compared to the previous quarter. This growth was driven by an increase in crypto asset volatility, which increased the mix of advanced volume compared to simple volume.

Coinbase's subscription and services revenue also increased by 33% year-over-year to $375.4 million, surpassing the estimated $348.4 million. The company expects its subscription and services revenue for Q1 2024 to be within the range of $410 million to $480 million.

Coinbase's Q4 transaction expenses were in the mid-teens as a percentage of net revenue. The company expects its technology and development, sales and marketing, and general and administrative expenses to increase in Q1 2024, driven primarily by higher stock-based compensation due to an improvement in an operational process. The company also expects its Q1 sales and marketing expenses to be lower than Q4, driven by seasonally lower NBA spend.

Coinbase's Q4 results demonstrate the company's resilience and ability to generate positive earnings in a challenging market. The company's focus on driving revenue through improving its core trading and USDC offerings, as well as driving utility in crypto with experiments in payments using USDC and Base, is expected to continue to drive growth in the coming years.

Coinbase's Q1 2024 financial outlook forecasts Subscription and Services Revenue to range between $410 million to $480 million. Transaction Expenses are projected to remain in the mid-teens as a percentage of net revenue, contingent upon the mix of revenue. The company anticipates its combined Technology and Development and General and Administrative Expenses to be substantial, landing between $600 million and $650 million, inclusive of around $215 million attributed to stock-based compensation. Furthermore, Sales and Marketing Expenses are estimated to fall between $85 million and $100 million, with approximately $17 million of that amount allocated to stock-based compensation. This outlook reflects Coinbase's operational and strategic financial planning for the start of the 2024 fiscal year.

The company's strong Q4 performance and positive outlook for Q1 2024 have led to an increase in investor confidence, with the stock price of Coinbase Global (COIN) increasing by more than 12% in after-hours trading following the release of the Q4 earnings report.

In conclusion, Coinbase Global's Q4 2024 earnings report highlights the company's ability to generate positive earnings in a challenging market. The company's strong performance was driven by an increase in transaction revenue, subscription and services revenue, and other revenue, along with a focus on improving its core trading and USDC offerings, and driving utility in crypto with experiments in payments using USDC and Base. The company's positive outlook for Q1 2024 and its focus on driving growth in the coming years have led to an increase in investor confidence, which is reflected in the stock price of Coinbase Global (COIN).


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