Key points to remember
- Analysts estimate EPS at -$2.39 from $6.47 in Q2 2021.
- Quarterly trading volume is expected to decline significantly year over year.
- Revenue is expected to fall sharply year-on-year.
Coinbase Global Inc. (PIECE OF MONEY) has struggled with the broader cryptocurrency market over the past few months. A sharp decline in trading volume plunged the company from the fourth-largest digital asset exchange last year to 14th by volume in July. The decline comes as the company grapples with other issues. A former Coinbase executive faces criminal charges for insider trading, and the Securities & Exchange Commission (SECOND) investigating whether the company improperly let US customers trade digital assets.
Investors will be watching for signs of the impact of these and other recent developments on Coinbase’s financial performance when the company releases its after-market results on August 9, 2022 for the second quarter of fiscal 2022. Analysts are not optimistic. The company is expected to post growing losses per share on a sequential basis and a sharp decline in year-over-year (YOY) revenue.
Investors will also focus on Coinbase’s total trading volume. It is not only a key measure of Coinbase’s overall activity in the volatile cryptocurrency space, but it is also a primary driver of revenue through trading fees. Analysts expect a significant decline in quarterly trading volume year over year.
Coinbase shares have significantly underperformed the market over the past year. In August and September 2021, Coinbase stock moved above and then below the S&P 500. It then staged a rally beginning in late September and peaking in November around its fiscal third quarter earnings report. 2021. Since then, however, Coinbase shares have plunged. They fell steadily when the company released its fiscal 2022 first quarter results in May and have traded sideways since then. As of August 7, Coinbase stock provided a 1-year total return of -63.6%, well behind the S&P 500 return of -6.4% over the same period.
Source: Trading View.
Coinbase Earnings History
Coinbase saw dramatic growth in earnings per share (PES) over the past two years. EPS increased from $0.25 in the first quarter of fiscal 2020 to $6.47 in the second quarter of fiscal 2021. EPS more than doubled year-on-year in seven of the eight quarters in those two years. But that trend reversed sharply in the first quarter of fiscal 2022. Coinbase posted significant losses per share for that quarter, the first time it had recorded losses in at least more than two years. Now, analysts expect losses to widen in the second quarter of fiscal 2022, posting EPS of -$2.39. Note that the EPS numbers are on a proforma base, which means revenue before Coinbase initial public offering (IPO) in April 2021 use the number of shares after the IPO. This is an apples-to-apples comparison between pre-IPO and post-IPO earnings numbers to avoid the impression that there was a major change in the business at the time of the IPO. IPO.
Coinbase’s revenue performance followed a similar trajectory. With the exception of the second quarter of fiscal 2020, when revenue dipped slightly year-over-year, Coinbase’s revenue grew significantly in each quarter of fiscal 2020 and 2021. In those two years, revenue soared from $190.6 million in the first quarter of fiscal 2020 to nearly $2.5 billion in the fourth quarter of fiscal 2021. However, revenue fell sharply year-on-year in the first quarter of fiscal 2022, and analysts expect declines to accelerate for the second quarter of fiscal 2022.
| Coinbase Key Stats | |||
|---|---|---|---|
| Estimate for the second quarter of fiscal 2022 | Q2 2021 | Q2 2020 | |
| Earnings per share ($) | -2.39 | 6.47 | 0.48 |
| Revenue ($B) | 0.8 | 2.2 | 0.2 |
| Total trading volume ($B) | 219.6 | 462.0 | 28.0 |
Source: visible alpha
The key metric
As mentioned above, investors are turning to Coinbase’s key quarterly trading volume metric. The company defines this metric as the total US dollar value of matched trades that take place between a seller and a buyer on the Coinbase trading platform. The volume of trading activity has a direct impact on Coinbase’s revenue, which largely comes from transaction fees. Trading activity also reflects Coinbase’s liquidity, overall trading health, and the broader performance of the cryptocurrency economy. It is heavily impacted by the price of crypto assets. Coinbase has acknowledged that a substantial portion of its trading volume comes from a small number of customers and major cryptocurrencies including Bitcoin and Ethereum.
Coinbase’s quarterly trading volume grew massively with EPS and revenue in fiscal 2020 and 2021. It grew more than 18-fold, from $30.0 billion in the first quarter of fiscal 2020 to $548.0 billion in the fourth quarter of fiscal 2021, with the most dramatic gains occurring amid a major cryptocurrency. market rally. Trading volume was down slightly year-over-year in the first quarter of fiscal 2022 as crypto prices fell. Analysts now expect volume to fall sharply year-over-year in the second quarter of fiscal 2022. Trading volume is expected to be at its lowest level in at least eight quarters.