Coinbase's Stock Plummets Following SEC Lawsuit Against the Company
Coinbase Surges 17% Following Earnings Report; Analysts Laud Performance Amid Regulatory Ambiguity Concerns
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Coinbase (COIN) stock surged following the release of the company's Q1 earnings report, which exceeded analyst expectations for both revenue and loss per share.
“Overall, we were pleased with the result and would characterize the near-term financial outlook as a modest positive to expectations,” Devin Ryan, JMP Securities financial technology research director, wrote in a note to investors. “Given the continuation of a challenging environment, coupled with all the regulatory headlines, it was nice to see a relatively clean quarter with respectable results, all things considered.”
Coinbase, a popular cryptocurrency exchange, released its Q1 earnings report on Thursday evening, revealing impressive results. The company reported an adjusted loss per share of $0.34, which was significantly better than the expected loss of $1.45. Furthermore, Coinbase's revenue for the quarter came in at $773 million, exceeding estimates of $655 million and reflecting a robust 23% growth from the previous quarter. These positive results have contributed to a surge in the company's stock price.
Barclays’ analyst Benjamin Buddis was particularly impressed by the increase in interest yield that resulted from higher spreads on certain "simple" (i.e., non-Advanced Trade) trades that rolled out through Q1. While the trend “may not be sustainable long term,” he wrote, “[it] appears to be fairly sticky for now.”
JPMorgan analysts had a more pessimistic outlook, citing concerns about the current state of the market. Specifically, they pointed out that trading volumes have been under pressure in the second quarter, which is a troubling sign. Additionally, the analysts noted that the decline in USDC market capitalization is also worrisome, and the staking services are not performing as well as they had anticipated. Overall, their assessment was less positive than that of other analysts.
“While earnings were meaningfully better than expected, the outlook generally doesn’t seem as good,” they wrote, continuing with a neutral rating on the stock.
Goldman Sachs exercised prudence and emphasized the highly unpredictable regulatory landscape.
“We see risk that limited bandwidth in Congress increases the likelihood that regulatory developments will largely be driven by regulators, rather than policymakers,” the Goldman team wrote. “Thus, we see limited near-term catalysts for increased retail engagement, adoption in the U.S.”
Despite increasing its 12-month price target to $45 from $40, which still represents a 20% downside from the current price of $57.60, Goldman Sachs maintained its sell rating on the shares due to the lack of clarity on organic growth prospects and ongoing regulatory uncertainties.
Coinbase has been vigorously advocating for improved regulatory transparency in Washington D.C., persisting in its efforts even after receiving a Wells Notice from the U.S. Securities and Exchange Commission (SEC) notifying the company of the agency's intention to take enforcement action against the exchange and its staking services.
During early Friday afternoon trading, the shares surged by 17%, recovering a significant portion of the losses incurred in the past six weeks and bringing their year-to-date gains to 70%.
Source Coindesk
