Much of Wall Street chooses to soft pedal Coinbase’s weak earnings

Coinbase Global’s latest earnings were even weaker than expected, but with an eye toward next week’s election and its effect on cryptocurrency markets, many analysts on Wall Street say the exchange is still a buy. The operator of the largest U.S. marketplace for buying and selling cryptocurrencies reported third-quarter financial results late Wednesday, with subdued crypto prices in what is historically the weakest quarter for crypto assets weighing down trading revenue. Coinbase also warned that an October drop in the price of ether could offset growth in nontrading revenue in the current quarter. Coinbase tumbled as much as 8.6% in early trading Thursday, touching a low of $193.56. But more optimistic analysts say Coinbase has already seen a bit of a recovery in the current quarter – especially given bitcoin’s breakout this week to near an all-time high – and that the post-election environment for crypto is brighter regardless of which party wins control of the White House and Congress. “While we continue to see nice incremental progress in business operations, we think a bigger catalyst here shorter term could be a change in the regulatory backdrop, most notably around the U.S. election next week,” Joseph Vafi, an analyst at Canaccord Genuity, said in a note late Wednesday. “It is generally a consensus opinion at this point that no matter who wins the White House, crypto could get a positive shot in the arm.” The election outcome at one point was widely viewed as a key catalyst for the price of bitcoin. Now, the view is that with such a strong setup for bitcoin – demand is growing while supply is slowing and interest rates are expected to come down further – there’s bound to be less uncertainty in the market, which should boost prices. COIN mountain 2024-06-30 Coinbase shares in the second half of 2024. Furthermore, federal legislation would unlock state-level expansion opportunities for Coinbase and add additional pricing power to its retail trading business, Citigroup’s Peter Christiansen said in a Thursday morning note. “Certain states have restricted staking while a federal debate on the technology persists, but … additional federal clarity in this area could potentially help reverse these states’ decisions,” Christiansen said. “Areas of possible growth in Coinbase’s business under the new administration include increased transaction revenue from the acceptance and trading of stablecoin pairs, more fee-based revenue from the adoption of staking, and higher payments volume owing to the expansion of banking and payments partners.” Both Citi and Canaccord Genuity have buy ratings on Coinbase. Revenue from Coinbase’s subscription and services – which includes stablecoins, staking and leverage for Prime traders – fell in the third quarter from the previous three-month period but saw a 66% increase from a year ago. On the earnings call, CEO Brian Armstrong said he expects to see “the most pro-crypto Congress ever” next year. Nevertheless, Piper Sandler, which has a neutral rating on Coinbase, said it wants to see more progress on regulation before becoming more positive on the stock. “We continue to believe COIN is positioned to be a dominant player in crypto over the long term, but there remains a significant lack of regulatory clarity surrounding many aspects of COIN’s U.S. operations,” Patrick Moley, an analyst at the firm, said in a note. Bank of America also remains neutral, saying that while “the current macro and regulatory environment is becoming more positive for cryptocurrencies, providing a tailwind to market cap appreciation and trading volumes,” there remains a potential overhang threatening the stock tied to SEC lawsuits against crypto firms, as well as Coinbase’s dependence on transaction revenue. —CNBC’s Michael Bloom contributed reporting.