Report Shows Coinbase Revenue at Risk Due to Plunging Trading Volumes and Regulatory Concerns

Amid an ongoing slowdown in cryptocurrency trading,the third-quarter earnings report of Coinbase is expected to reveal a decline in revenue.

Coinbase's results, which will be reported post-market today, may show how the exchange navigates these pressures.

Third-Quarter Earnings Set to Reveal Revenue Decline of Coinbase

Coinbase (COIN) is set to report its third-quarter earnings on Wednesday, with analysts forecasting a challenging financial period.

According to FactSet estimates, the exchange is expected to post a 13% revenue decline from Q2, falling to $1.26 billion from $1.45 billion. Wall Street analysts attribute this downturn to reduced spot trading volume, with fewer market catalysts driving investor activity.

Earnings per share (EPS) is anticipated at $0.46, marking an increase from $0.14 in Q2, though still constrained by industry-wide trading volume softness.

In a client report, Barclays analyst Benjamin Buddish noted, Volumes continued to soften through the quarter, especially retail transactions." While maintaining an equal weight rating for Coinbase, Buddish raised the stock price target from $169 to $175.

Data from The Block suggests industry-wide trading volume dropped to $3.3 trillion this quarter from $3.92 trillion last quarter.

Coinbase faced intensified competition as Crypto.com became North America's top exchange by volume since July. Analysts suggest Crypto.com's wider token variety may have drawn users away from Coinbase.

The exchange's competitor, Robinhood (HOOD), is also preparing to release its Q3 earnings post-market on Wednesday.

Regulatory Uncertainty Hampers U.S. Exchange Volumes

Amid lower trading volumes, Coinbase also faces regulatory uncertainties tied to the approaching U.S. presidential election.

Analysts at Oppenheimer highlight that while North American trading volume weakened, international markets showed resilience. Spot trading volume outside North America rose 61% this quarter, indicating global growth despite U.S. market challenges.

Political uncertainties and lack of catalysts have negatively impacted Bitcoin volumes," Oppenheimer analyst Owen Lau observed, emphasizing the bright spot" of international volume growth.

Regulatory overhang, particularly concerning new U.S. crypto policies, may weigh on trading volume across U.S.-based exchanges.

Oppenheimer projects Q3 revenue for Coinbase at $1.29 billion, with EPS between $0.40 and $0.54. The firm holds an outperform" rating for Coinbase, with a long-term price target of $282 over the next 12 to 18 months.

These international trends present both challenges and opportunities for Coinbase. Coinbase could strengthen its U.S. market position amid stiff competition by expanding offerings or addressing the regulatory landscape.

Ethereum Decline Impacts Staking Revenue

Beyond trading fees, analysts foresee weaker staking revenue for Coinbase due to Ethereum's underperformance.

J.P. Morgan analyst Kenneth Worthington links the decline in staking revenue to Ether's (ETH) 24% drop from Q2, with prices fluctuating between $2,330 and $2,760 since August.

ETH's underperformance has dampened overall demand for staking services on Coinbase, which relies heavily on Ethereum's stability for revenue growth in this sector.

Ether particularly underperformed, impacting Coinbase's staking revenue in Q3," Worthington commented. He noted that ETH's market cap reduction has weighed on Coinbase's subscriptions and services revenue.

Staking, a key revenue source, saw positive momentum in Q2, with a 17% growth due to increased USDC balances on the platform. However, Ethereum's struggle this quarter has undercut Coinbase's ability to capitalize on staking services.

J.P. Morgan, which maintains a neutral rating on Coinbase, raised its price target from $180 to $196. They project Q3 EPS between $0.42 and $0.54, reflecting mixed revenue potential.

Despite a 30% rise in Coinbase's year-to-date share value, the stock remains down 21% from its peak of $279.71 in March.

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