Coinbase (COIN.US) Q3 results miss expectations amid sluggish cryptocurrency market trading
1min read Shares of Coinbase (COIN.US) fell more than 4% in after-hours trading on Wednesday after the cryptocurrency exchange reported third-quarter results that missed expectations, weighed down by sluggish trading in the cryptocurrency market. While the company said trading in the fourth quarter may be more active, the decline in the price of Ethereum in October may offset growth in its subscription and services business for the current quarter.
Coinbase reported third-quarter total revenue of $1.21 billion, up 79% year over year and down 17% sequentially, missing analysts' average estimate of $1.26 billion; net income attributable to common stockholders of $75.45 million, compared with a net loss of $2.265 million in the year-ago period; and diluted earnings per share of $0.28, missing analysts' average estimate of $0.40 and compared with a loss of $0.01 in the year-ago period.
By segment: Trading revenue was $573 million, up 98% year over year and down 27% sequentially; retail trading revenue was $483 million, and institutional trading revenue was $53.3 million. Subscription and services revenue was $555 million, up 66% year over year and down 7% sequentially.
The cryptocurrency market has been sluggish for much of the year, trading in a narrow range of $55,000 to $70,000. With investors focused on the U.S. presidential election and largely on the sidelines, Bitcoin has had no major catalysts and has been low on volatility. While the cryptocurrency price action has been lackluster, the value of stablecoins (widely considered to be the killer app for cryptocurrencies) has hit new highs, helping Coinbase's stablecoin revenue reach $247 million in the third quarter, up 43% year over year and 3% sequentially.
Coinbase has struck a 50/50 revenue-sharing agreement with Circle to share the interest income from reserves supporting the USD Coin (USDC), the second-largest U.S.-backed stablecoin. With interest rates expected to continue to decline, this revenue could be challenged in the current quarter.
Coinbase also announced a $1 billion stock buyback plan.
Looking ahead, Coinbase expects fourth-quarter subscription and services revenue to be between $505 million and $580 million. Coinbase expects revenue growth for the business to be flat, due to a 10% decline in the price of Ethereum in October compared with the average price in the third quarter, as well as negative factors reflecting market expectations of rate cuts, etc.
