Analysts are predicting a better-than-expected earnings report for Coinbase (COIN) for the second quarter, despite regulatory risks and the threat of lower trading volumes. According to FactSet consensus estimates, revenue is expected to decrease from the previous quarter, to $629 million from $773 million, and earnings per share are expected to be a loss of $0.76, compared to a loss of $0.34 in the first quarter.
We expect adjusted EBITDA to come in well ahead of consensus, analysts at British banking giant Barclays wrote in a report on Tuesday. The 177% year-to-date rally of Coinbase’s shares is attributed to two factors, Barclays said. One is the U.S. District Court of the Southern District of New York judge’s ruling that the sale of Ripple’s XRP tokens on exchanges and through algorithms did not constitute investment contracts, and the second is multiple applications from financial institutions for spot bitcoin exchange-traded funds (ETF).
However, Berenberg analyst Mark Palmer warned in a note on Tuesday that another judge from the same district rejected the ruling, arguing that there should be no distinction between institutional sales and sales to retail investors on crypto exchanges. He also warned about risks coming from the USDC stablecoin, which generated $199 million, or 27% of Coinbase’s net revenue from interest income in Q1. Additionally, trading volume remained low in July, according to data from The Block which showed that exchange volume in July was down 5% month-over-month.
We had expected COIN to report weak Q2 23 trading volumes even before the SEC filed a lawsuit against it on June 6, and we believe the overhang from the suit could result in persistent weakness in the company’s trading volumes as well as a reduction in the amount of assets on its platform, Palmer wrote.