Strong Performance Expected for Coinbase in Q4
The fourth quarter of the fiscal year has been promising for cryptocurrency markets, and Wall Street analysts anticipate that leading U.S. exchange Coinbase (COIN) will showcase a significant increase in earnings compared to the previous quarter. According to projections from FactSet, Coinbase’s revenue for the fourth quarter is expected to reach approximately $1.8 billion, a notable rise from $1.26 billion in the third quarter. Furthermore, earnings-per-share are anticipated to leap to $1.99, up from merely $0.41 in the prior period.
Perhaps more crucially, following Donald Trump’s recent presidential election victory, analysts predict that exchange volume will climb to $195.9 billion in the final three months of the year, an increase from $185.3 billion in Q3. This projected volume would mark the strongest quarterly performance for Coinbase since the fourth quarter of 2021. Analysts at Citibank expressed their confidence in Coinbase’s future, stating, “We maintain our bullish thesis on COIN, believing the company is well-positioned to capitalize on a potential transition into a new era for cryptocurrency.” They currently hold a buy rating on the stock and recently raised their price target to $350 from $275. As of Tuesday, shares are trading at approximately $270, reflecting a nearly 90% increase from the same time last year. However, the Citibank team does foresee Coinbase reporting fourth-quarter revenue of $1.7 billion, slightly below the consensus estimate of $1.8 billion.
JPMorgan’s Ken Worthington also weighed in on the situation, describing the November election as a “monumental catalyst for the crypto ecosystem,” although he maintains a neutral stance on the stock. He estimates that Coinbase’s fourth-quarter revenue will come in at $1.77 billion, which would also fall short of the $1.8 billion target.
2025 Outlook: Navigating Uncertainty
While the closing months of 2024 presented numerous catalysts for both cryptocurrency and Coinbase, analysts express caution regarding predictions for 2025, as policy changes generally require time to materialize. According to Citibank, “For [2025], we assume static crypto prices and factor in more normalized volumes, projecting a 6% year-over-year growth in transaction revenue compared to the consensus of 3% growth.”
As seen in previous market trends, analysts expect Coinbase’s stock to function as a ‘risk-on’ asset throughout 2025, likely experiencing volatility in response to macroeconomic developments and fluctuations in market sentiment. The analysts further noted, “We anticipate that the next 1-2 years will be crucial for Coinbase’s business model and competitive strategy, as well as for the broader digital asset ecosystem.”
One of Coinbase’s primary objectives over the past year has been to diversify its revenue streams, with approximately 50% still reliant on trading fees. Retail traders, who typically incur the highest trading fees, have yet to return to the levels seen in 2021. Research from Kaiko indicates that the share of trading volume from retail clients has diminished to just 18%, a stark decline from 40% in 2021, which continues to impact transaction revenue negatively.
Citi suggests that Coinbase could address this challenge by further exploring the tokenization of assets, advancing embedded smart contract applications, and delving into Web3 technologies. They see potential efficiencies in cross-border transactions and remittances, as well as utilizing blockchain technology for AI governance. “In our view, the next evolution for Coinbase’s growth trajectory will depend on utility… an area rich with proofs-of-concept yet perhaps waiting for clearer regulatory frameworks,” the bank’s analysts concluded.
