Coinbase, a leading cryptocurrency exchange, is expected to report strong earnings for the second quarter of 2023, despite potential risks.
Coinbase Q2 Earnings: Analysts Optimistic but Cautious About USDC Risks and Lower Trading Volumes
Analysts predict resilience in retail trading activity on the exchange, but they also warn about potential declines in Coinbase’s revenue from the USDC stablecoin and possible impacts of the SEC’s lawsuit against the exchange on trading volumes.
Estimates and Predictions for Q2 Earnings
FactSet consensus estimates suggest a decrease in Coinbase’s revenue from the previous quarter, from $773 million to $629 million. Trading volume for the period ending June 30 is also expected to have slowed down to $114 billion from $145 billion in Q1. Earnings per share are expected to be a loss of $0.76, compared to a loss of $0.34 in the first quarter.
Impressive Resilience but Potential Compression
Analysts at Barclays noted the impressive resilience of retail trading activity on the exchange. However, they also suggested that the upside remaining over the longer term could compress.
Despite these concerns, Coinbase shares are currently up 177% year-to-date, thanks to a favorable court ruling regarding Ripple’s XRP tokens and multiple applications from financial institutions for spot bitcoin exchange-traded funds (ETFs).
Potential Short-lived Rally and USDC Risks
Despite the positive outlook, some analysts warn that the rally could be short-lived. Berenberg analyst Mark Palmer cautioned that the recent rally’s underpinnings were shaky and that the reality of Coinbase’s precarious situation might come back into focus with the release of its Q2 report.
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.
Conclusion
As Coinbase prepares to report its Q2 earnings, analysts remain optimistic but cautious. While the resilience of retail trading activity is expected to contribute to strong earnings, potential risks from the USDC stablecoin and the SEC’s lawsuit could impact future performance.
Investors and market watchers will be keenly observing the upcoming earnings report and the company’s response to these challenges.
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