Coinbase Earnings Hurt by Low Volume But Trump Could be Wild Card, Analysts Say

• Analysts expect Coinbase's (COIN) earnings to take a hit in the second-quarter as trading volume slowed down from the prior months.
• Estimates collected by FactSet predict overall revenue dropped to $1.37 billion while earnings-per-share stood at $0.94.
• U.S. election shaping up to be an important catalyst for the stock, one analyst said.

Analysts expect a significant drop in Coinbase’s (COIN) second quarter earnings compared to the first quarter, as trading volume and transaction revenue lowered across the industry.

The crypto exchange reports earnings after the bell on Thursday with estimates collected by FactSet predicting overall revenue dropping to $1.37 billion from $1.64 billion in the previous quarter. Still, on year-over-year basis, this would be a 94% increase.

Earnings-per-share are estimated to land at $0.94 versus the whopping $4.40 in the first quarter but $0.46 from a year ago.

“May was a positive month for the crypto ecosystem amid the U.S. Ether spot ETFs approval, however, we saw markets contract in both April and June, muddling the quarter’s aggregate performance,” analysts at J.P. Morgan wrote.

JPM, which has a neutral rating and price target of $171 by the end of the year on COIN, sees earnings-per-shares at $0.30 with revenue of $1.36 billion.

Analysts at Barclays echoed the sentiment. “Crypto market activity spiked in March but has reversed since, and Street exchange volume and revenue estimates look too high.” The British bank expects $1.432 billion in revenue and $1.79 earnings-per-share for the second quarter and adjusted its price target down 4% to $196 for the end of this year. Barclays rates COIN as an underweight.

To back its predictions, Barclays looked at retail trading data from online broker Robinhood (HOOD) which publishes monthly metrics for its platform and typically correlates with trading on Coinbase. According to the data, trading activity softened in the first two months of this quarter and the firm’s crypto retail trading volumes declined 35% from the first quarter.

Based on those numbers, Barclays expects Coinbase’s retail volumes to have dripped roughly 30%. A slow down for Coinbase may also indicate how Robinhood's earnings will shape up when it reports on Aug. 7.

However, the investment banking firm Oppenheimer (PT: $282, outperform ) added a bit of optimism, saying that the upcoming election could act as a positive catalyst for the stock. "Since our meetings with legislators in May, our thesis has been that Coinbase would benefit the most in our coverage if former President Donald Trump is re-elected. Recent events including Trump's continuing to speak in Bitcoin conferences in-person only increase our confidence," the firm's analyst wrote.

In fact, former president Donald Trump's crypto-friendly stance might have tied the entire digital asset market to the outcome of the presidential election. The political undertone became even more apparent when Trump delivered his speech recently at the Bitcoin 2024 conference in Nashville in front of a cheering audience. In it, his promises to the community included firing SEC chair Gary Gensler and unveiling his plans to make BTC the national reserve if he is elected.

Read more: Trump Backs U.S. Bitcoin Reserve and Says Democrat Win Will Be Disaster for Crypto: 'Every One of You Will Be Gone'

Base hype

Oppenheimer’ analyst, however, warned investors about a “hype die down” for Base, the company’s Layer-2 scaling solution for Ethereum. The firm predicted that Coinbase generated revenue of $20 million in the second quarter, down from $32 million in the prior quarter.

JP Morgan (PT: $181) analysts also said that activity on Base networked mellowed in the second quarter. Although they pointed out that profitability increased exponentially after the Ethereum’s Dencun Upgrade in March which lowered the cost of activity on the network's Layer-2 chains, including Base. As a result, JPM expects roughly $20 million in fees earned through Base.