Coinbase (COIN, Financial), the largest publicly traded cryptocurrency exchange in the US, saw its stock drop 15.34%, marking the sharpest single-day decline since July 2022. This downturn followed a disappointing earnings report that fell short of analyst expectations. Despite the broader cryptocurrency market's substantial gains, including Bitcoin's over 60% rise this year, Coinbase's stock has only increased about 3% in 2023.
In its latest quarterly report, Coinbase reported an increase in revenue to $1.21 billion. However, this was below the anticipated $1.25 billion. The company's net income was $75 million, significantly less than the projected $112 million. Notably, a recent accounting change adopted in the second quarter, which values digital assets at market price, contributed to a pre-tax loss of $121 million for the latest quarter.
JPMorgan analysts noted that while the overall performance was below expectations, Coinbase continues to execute in emerging business areas, offering potential growth opportunities. They maintain a "neutral" rating on the stock.
In a letter to shareholders, Coinbase projected that subscription and services revenue for the current quarter would range between $505 million and $580 million. In contrast, the company's trading revenue was $190 million in October last year.
A contributing factor to the subdued investor enthusiasm is the waning interest among retail investors in trading digital assets. Although this key customer segment re-engaged with the market earlier this year, interest has dwindled, coinciding with Bitcoin's consolidation after reaching record highs in March. Recently, Bitcoin's price approached its March 14 peak of $73,881.3 but has since moderated.
