Global reported booming first quarter earnings and revenue that were mostly in line with the company’s April forecast. The company clearly profited from the frenzy for all things crypto in the quarter, its first since going public last month.
But the headline numbers may not be what moves the stock. Company advice and some details from the post could have a bigger impact. What the release showed is that Coinbase’s growth continues to increase in the second quarter, but it is struggling to forecast full year results due to high volatility in the crypto market. And the company may need to add new assets to its platform to take full advantage of the growth in crypto.
In addition, Coinbase (symbol: COIN) is clearly subject to conditions beyond its control. The action faltered Thursday after Bloomberg announced that competitor Binance was under investigation by the Department of Justice and the Internal Revenue Service, which are investigating possible money laundering and tax offenses on the platform.
There is no indication that Coinbase is facing a similar investigation, and one analyst predicted that the Binance news would help Coinbase by making it relatively more secure. Still, Coinbase fell 6.5% on the day. The stock rose 3% after hours of trading following the release of results.
Coinbase reported revenue of $ 1.8 billion, as it had previously projected. That is compared to $ 191 million in the first quarter a year ago. And Coinbase reported net profit of $ 771 million, up from $ 32 million a year ago and the $ 730 million to $ 800 million range it projected in April.
Coinbase has 56 million users and 6.1 million monthly transactions (MTU). It derives most of its money from transaction fees, so the 6.1 million figure is key – unlike brokers who make money on customer deposits, Coinbase is particularly reliant on people who move money. rather than let him sit.
The good news for investors is that Coinbase says the level of activity seen in the first quarter appears to continue into the second quarter. “Coinbase’s quarterly performance on our four key business metrics tends to meet or exceed our first quarter results,” the company said in a letter to shareholders. Trading volume is expected to reach or exceed first quarter levels if it continues at the current pace, the company said.
In a unique move that highlights the unpredictability of the crypto market, the company has released three levels of advice depending on the next step in the crypto market. Due to the volatility of the industry, Coinbase’s revenue seems more difficult to model than the revenue of other companies.
In a scenario where the crypto market continues to grow, Coinbase expects its 2021 MTUs to reach nine million. If the market flattens out a bit, growing only modestly, Coinbase could reach seven million MTUs. And a drop in crypto assets and volatility could push MTUs down to 5 million, the company said.
Coinbase also appears to be successful in adding new lines of business. Over a million customers are now participating in ‘staking,’ where they lend crypto assets and generate interest. If the business can develop such activities, it may become less dependent on its volatile transaction income.
Coinbase also plans to add new assets faster, as other platforms could steal its thunder. He may lose clients to Robinhood, in particular, which offers Dogecoin trading unlike Coinbase. The huge volumes of this asset have helped temporarily crash the Robinhood platform in recent months.
“Our competitors support some crypto assets that are experiencing high transaction volume and market capitalization growth that we do not currently support, as well as new products and services that we do not offer,” Coinbase said. .
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