On Tuesday, following the market’s close, Coinbase (COIN) will deliver Q3’s financials. Recall, in Q2 the leading crypto exchange delivered blistering beats across the board, which coincided with bitcoin’s surge to new highs during May.
Coinbase’ fortunes are closely tied to BTC’s performance, and following bitcoin’s sharp decline from mid-May Q3 until bottoming out toward the end of July, it would be prudent to expect a more downbeat performance in the quarter, says J.P. Morgan’s Ken Worthington.
“Cryptocurrency trading volume slowed meaningfully in 3Q21,” the analyst said. “We estimate volumes were likely down ~40% from 2Q21, levels largely based on the strength of volumes in 2Q but pushed lower by particularly weak trading activity in July.”
Worthington’s take is given credence by Coinbase’s Q3 website traffic. Between Q2 and Q3, unique visitors (UVs) dropped by 37%, and as the analyst noted, July represented the bottom with UVs increasing thereon in.
It should also be noted, that while UVs dropped sequentially, they are still meaningfully higher than during the same period last year – by 132%, as it happens.
When compared to peers, industry data actually shows that Coinbase’ volumes were better than those exhibited by the rest of the industry; these declined by around 38% compared to Coinbase’ 25% drop in the quarter, although that could be down to an uptick in COIN’s newer Institutional Prime business which generates less revenue. As such, Worthington is modeling a 30% drop in retail volume.
The outlook for Q4 should show some quarterly improvement, which unsurprisingly coincided with bitcoin and crypto’s recent surge to fresh highs. Not to mention, the October approval of 3 bitcoin ETFs plus Coinbase’ announcement of its upcoming entry into the NFT space has further helped boost sentiment. The data confirms this notion. According to Apptopia, trading volume and app download data looked “much better” in October, showing a 70% increase from Q3 levels.
To this end, the J.P. Morgan analyst rates COIN shares an Overweight (i.e. Buy) along with a $375 price target. The implication for investors? Upside of 5% from current levels. It will be interesting to see if Worthington’s target get a makeover when the company reports earnings tomorrow. (To watch Worthington’s track record, click here)
Looking at the consensus breakdown, based on 12 Buys vs. 3 Holds and 2 Sells, COIN stock has a Moderate Buy consensus rating. (See Coinbase stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.