Crypto-trading platform reports sales well off analysts’ expectations, CFO blames a less volatile market and says that the wild price swings of October brought the business back.
Coinbase Global Inc. plunged 13% from an all-time high Tuesday afternoon, after revealing a summer slowdown in cryptocurrency trading caused a sales slump.
Coinbase revenue fell in the third quarter by more than 40% from the previous three months, as cryptocurrency trading volumes. Coinbase, which offers a signature platform for trading crypto, felt the pain of users not trading to the same levels of previous months.
“The story of our third quarter really centers around lower volatility that we saw in the quarter,” Chief Financial Officer Alesia Haas said in a conference call Tuesday. “Our monthly transaction users and trading volumes and therefore transaction fee revenue all correlate with volatility. So it’s a very important driver of our financials.”
Coinbase’s COIN, +0.98% financials did not live up to expectations. The company reported third-quarter earnings of $405.3 million, or $1.62 a share, up from $81.3 million in profit in the same quarter a year ago, before the crypto-trading platform went public. Total revenue grew to $1.31 billion from $286.7 million a year ago, but declined sequentially from $2.23 billion in the second quarter, while transaction revenue totaled $1.09 billion, down from $1.93 billion in the second quarter.
Analysts on average expected earnings of $1.82 a share on sales of $1.61 billion, with transaction revenue accounting for $1.31 billion, according to FactSet. Coinbase shares dove 13% in the after-hours trading session, after closing with a 1% increase at $357.39, a closing record for the stock.
Analysts largely expected Coinbase revenue to decline from the second quarter, the platform’s first full period as a public company. They tracked a decline in crypto-trading activity in the second quarter, especially July, and Square Inc. SQ, -2.53% seemed to confirm that trend in its earnings report late last week.
“While July was particularly slow, activity levels picked up in August and further in September,” JP Morgan analysts wrote in a preview of the earnings report this week. “Thus far, October has been active for cryptocurrency trading, not unexpected given heavy news flow and token appreciation.”
The analysts, who maintained their overweight rating and modestly increased their price target to $375 from $372 in the note, posited that Coinbase has held up better than the industry overall amid the decline, with volumes dipping about 25% for Coinbase while the larger crypto-trading volumes declined closer to 40%.
MarketWatch
