Coinbase Q3 preview: Where next for the Coinbase share price?

Coinbase’s earnings will reflect a drop in crypto trading activity in the third quarter, but has interest rebounded following a resurgence in crypto prices in recent weeks? We explain what to expect and consider how Coinbase shares could react.

Crypto 2

When will Coinbase release Q3 earnings?

Coinbase is scheduled to release third quarter earnings on Tuesday November 9.

 

Coinbase Q3 earnings preview: what to expect from the results

The third quarter will be a test for Coinbase. Having handled record trading volumes and secured its highest number of active users in the second quarter, both metrics are expected to have softened in the third following a tempering within the cryptocurrency market.

Figures from Bloomberg suggest market-wide cryptocurrency trading activity was down as much as 37% in the third quarter compared to the second, driven by the falls in the price of the likes of bitcoin and Ethereum during July, with only a limited recovery seen before the quarter drew to close at the end of September. Further data from The Block, which tracks crypto trading across the market, suggests overall trading volumes dropped to $2.9 trillion in the third quarter from $4.6 trillion during the boom seen in the second.

($, trillions)

Jan

Feb

Mar

Apr

May

Jun

July

Aug

Sep

Oct

Crypto Exchange Volume

0.868

1.11

1.03

1.55

2.13

0.94

0.639

1.06

1.21

1.25

(Source: The Block)

However, much of this may already be priced-in. Coinbase warned its last set of results that monthly transacting users and trading volumes experienced a sharp drop in July from what was seen in the second quarter thanks to lower crypto prices and volatility, prompting it to warn that both metrics would deteriorate quarter-on-quarter in the three months to the end of September.

The number of monthly transacting users is expected to have slipped to 7.1 million in the third quarter from 8.8 million in the second, but verified users are expected to grow to 72.2 million from 68.0 million. Meanwhile, trading volumes are forecast to drop to $309.0 billion from the record $462.0 billion booked in the previous quarter.

Coinbase has said full year average monthly transacting users will range from as low as 5.5 million to as high as 8.0 million, with a mid-point range of 7.0 million.

Wall Street expects total revenue to come in at $1.57 billion. That would be up from just $286.7 million the year before but down from the record $2.22 billion booked in the second quarter.

Adjusted Ebitda is forecast to slip to $662.6 million from $1.15 billion in the second quarter as a result of lower trading activity and increased spending as Coinbase continues to prioritise its expansion and development over profitability. Meanwhile, net income is expected to plunge to $408.9 million from the $1.61 billion booked in the previous quarter. Net income would still be up from $81.3 million the year before.

The key job for Coinbase will be to show that the drop in activity during the third quarter is a blip rather than a long-term trend. The fact Coinbase shares have rallied over 27% since its last quarterly update shows markets believe the outlook for the fourth quarter looks much better than what was outlined for the third. Bitcoin has jumped over 40% in value since the end of September while Ethereum has soared over 50%. Plus, Coinbase could also be poised to capitalise on the interest in lesser-known cryptos such as Doge and Shibu, with the company having vowed to bring more assets to its platform at a faster pace going forward. Coinbase usually offers a glimpse into how the current quarter has started when it releases earnings and investors will be expecting a buoyant outlook.

Brokers remain bullish on Coinbase’s prospects and have an average Buy rating on the stock with a target price of $382.65, implying there is over 11% potential upside from the current share price.

 

Where next for the Coinbase share price?

Coinbase has traded range bound since June, capped on the upside by $296 and on the lower side by $205.  

The price broke out of the upper band mid-October and has traded in and ascending channel since. 

The 50 sma on the 4 hour chart has crossed over the 200 sma in a bullish signal. However, the RSI has moved into overbought territory which warrants caution. There could be some consolidation or a move lower on the cards before further gains. 

Immediate resistance can be seen at $348 a level from April 15 beyond here there isn’t that much to go on. Perhaps look towards $380 the upper band of the rising channel. 

It would take a move below $297 to negate the near-term uptrend.

Where next for the Coinbase share price?

 

How to trade Coinbase shares

You can trade Coinbase shares with City Index in just four easy steps:

  1. Open a City Index account, or log-in if you’re already a customer.
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