Bank of America has raised its revenue estimates for Coinbase Global Inc (NASDAQ:COIN) ahead of the crypto exchange’s second-quarter results, but warned that weaker trading volumes and ongoing pressure on transaction revenue could weigh on earnings.
The bank maintained its “Hold” rating on the stock and increased its price target to $405 from $260.
Retail trading volumes are expected to fall 40% quarter-over-quarter, according to BofA analysts, who now forecast total net revenue of $1.44 billion for the June quarter, still about 6% below consensus estimates of $1.54 billion.
“We fine-tune our institutional take rate and methodology for modeling the USDC revenue share,” the analysts wrote, citing higher total interest revenue as the main driver behind the revised forecast.
Subscription and services revenue is projected to reach $677 million, which is near the high end of Coinbase’s guidance but short of Street estimates. The update includes $335 million from interest income on stablecoin USDC, up from $298 million in the first quarter.
Still, BofA flagged continued weakness in Coinbase’s core trading business, with transaction revenue expected to decline 40% to $762 million. Retail transaction revenue is forecast at $654 million, while institutional trading revenue could fall 48% to $51 million amid reduced volumes and lower take rates.
Despite recent enthusiasm around stablecoins, the USDC market cap rose only 5% between May and June, suggesting limited near-term upside. “USDC market cap did not increase meaningfully in 2Q following 1Q EPS despite a flurry of stablecoin headlines,” the analysts noted.
Looking ahead, BofA said crypto trading activity appeared to be recovering in July. Average daily volumes for bitcoin were up 30% month-over-month, while ether and XRP volumes jumped 60% and over 100%, respectively, potentially setting the stage for stronger results in the third quarter.
Shares of Coinbase were down around 2.3% on Tuesday afternoon at around $370.