In the run up to second-quarter earnings from Coinbase Global Inc (NASDAQ:COIN) on Tuesday August 9, the NASDAQ-listed crypto exchange’s problems are multitudinous.
Not only have COIN shares been in freefall mode for the majority of the year, but it has suffered bad press time and again, with large-scale workforce reductions, arrests of former managers on insider tradng charges, and even bankruptcy rumours marring the exchange’s reputation.
On top of that, news that Cathie Wood’s Ark Invest fund offloaded around US$77mln of COIN shares hit the headlines at the end of last month.
So next Tuesday, can we expect more of the same or is there a beacon of hope for the flagging company?
By Coinbase’s own estimations (as outlined in first-quarter earnings), we can expect to see a further drop in monthly tracked users (MTUs) and a quarterly decline in trading volumes.
This will inevitably hit subscription and services revenues, and combined with a possible increase in general expenses (underscored by US$420mln in stock-based compensation), it’s likely that margins will also take a hit.
A poll of 16 analysts at yahoo!finance suggests possible losses of -US$2.68 per share and negative sales growth of over 50% year on year.
CNN Business’s earnings estimate is slightly less pessimistic at -US$2.47 per share.
On the flipside
A few recent announcements have given COIN shares a jolt this week.
Firstly, the world’s largest asset manager BlackRock announced that it will provide institutional clients with access to crypto trading and custody services via a partnership with Coinbase Prime.
Another major partnership was announced In the same breath, this time with Meta, which has just integrated Coinbase into Facebook’s 100-country NFT rollout project.
In response, COIN shares went up 50% within the week according to Friday's pre-market trade.
Another viewpoint is also taking place: Coinbase’s large contingent of institutional investors could be its saving grace.
Mikkel Mørch, Executive Director at Digital Asset Investment Fund ARK36, commented: “While small and retail investors have been virtually shaken out of the space over the past few months, institutions are now making a comeback.”
Mørch added: “Coinbase’s partnership with BlackRock provides yet another entry point for institutions to meaningfully engage with the crypto space. As the infrastructure for institutional investors to place their bets on digital assets grow, so will their involvement in this market.”
Of course, none of this goodwill will affect quarterly outcomes, but it may possibly shore up a bit of positive market sentiment to keep its market value afloat.
“I imagine the results are going to be pretty bleak given the year that the crypto space has had… the question is, just how painful are they going to be?” senior market analyst at Oanda Craig Erlam told Proactive.
However, that comment comes with a caveat: “The timing of this BlackRock announcement is potentially going to help because we know how forgiving investors are currently of earnings and revenues as long as the outlook is more promising.”
Bottom line: You shouldn’t expect much from Coinbase’s Tuesday earnings call, but for investors taking a longer view, it’s not all doom and gloom.