Analysts from Barclays and JPM Predict Coinbase (COIN) Could Fall Short of Q1 Earnings Estimates

Coinbase (COIN) approaches its first-quarter earnings announcement on unstable footing, with several analysts predicting subpar results due to a slowdown in retail trading adversely affecting the exchange’s key profit areas.

The company will unveil its first-quarter figures on Thursday after the market closes. Analysts anticipate earnings per share (EPS) to drop to $1.93 from $2.26 in the last quarter, with revenue expected to fall to $2.1 billion compared to the previous $2.27 billion, as reported by FactSet.

In the same quarter last year, Coinbase recorded an EPS of $4.40 and revenue of $1.2 billion. Trading volume for the upcoming report is projected to be around $403.8 billion, a decline from $439 billion in the previous quarter.

J.P. Morgan has revised its EPS forecast down to $1.59, noting a 10% decrease in Coinbase’s trading volume alongside a 17% reduction in the total crypto market cap for the quarter. Adjusted for losses in crypto assets, the firm forecasts EPS to be $2.39, aided by tightly managed expenses and consistent subscription income.

Barclays and Compass Point are anticipating more significant challenges ahead. Barclays has downgraded its revenue and EBITDA predictions, highlighting a sharp cooling of the market since January, despite some growth in stablecoins. They estimate retail trading volumes to only reach $69 billion, well below the market average of $79.8 billion.

Compass Point has taken a more pessimistic stance, lowering its rating on the stock to "sell" and estimating transaction revenue to be $1.24 billion, which is 7% lower than consensus forecasts. They argue that Coinbase is ceded retail market share to decentralized exchanges (DEXs) and predict further difficulties in the following quarter.

Robinhood, a widely-used trading platform, reported a 13% decline in transaction-based revenue compared to the fourth quarter, reflecting the slowdown in market activity during the first three months of this year.

Could Stablecoins Provide a Boost?

One glimmer of hope lies with stablecoins. Revenue from USDC surged in Coinbase’s latest quarter, as the stablecoin’s market cap rose by 42%, contributing positively to subscription income. Barclays estimates this revenue at $304 million for the first quarter, while even skeptics at Compass Point admit that USDC helped to compensate for the falling income from staking, attributed to a decline in ether’s price.

Oppenheimer has reduced its volume forecast to $380 billion from $440 billion, but points out that Coinbase has gained market share in U.S. spot trading. While this could be a positive trend, it may not be impactful if retail investors remain inactive.

Concerns are mounting regarding ongoing competitive pressures. Analysts have observed that faster and cheaper blockchains, like Solana and Coinbase’s Base, are attracting retail users interested in trading a broader range of tokens. Although Coinbase is gaining in U.S. market share, its position as a centralized, regulated exchange might not be sufficient to counter this trend.

Moving forward, analysts warn that the potential for a short-term recovery in trading volumes may be sluggish, particularly as retail investors often wait to recuperate prior losses before re-engaging with the market.

Year-to-date, Coinbase shares have decreased by 23%, currently priced at $198.06, while bitcoin has seen a rise of 3.8% since the year began, sitting at $97,023.