Cryptocurrency exchange platform Coinbase (NASDAQ:COIN) will announce its fourth-quarter financials after the market closes on February 21, 2023. Unfortunately, the ongoing macro and industry-specific headwinds indicate that COIN’s problems are unlikely to end soon, and Q4 could witness a continued decline in volume and retail engagement.
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The deterioration in macro-economic conditions negatively impacted crypto trading volume and COIN’s transaction revenues. Furthermore, the company highlighted during its Q3 conference call that volume is shifting away from the U.S. due to the expanding regulatory framework. This will adversely impact COIN’s financials as its business is concentrated in the U.S. Another issue COIN faces is increased competition from its competitors.
Given the challenges, Coinbase’s top line could remain under pressure. Moreover, it could continue to report losses. Analysts expect COIN to post a loss of $2.52 a share in Q4 compared to earnings of $3.32 per share in the prior-year quarter.
While COIN’s transaction revenues could decline, Subscription and Services revenue has emerged as a bright spot. Further, the company’s focus on streamlining its operations will likely cushion its bottom line.
Is Coinbase a Buy or Sell?
Coinbase stock sports a Hold consensus rating on TipRanks ahead of its Q4 earnings. Six analysts maintained a bullish view, while eight recommended a Hold. Meanwhile, five analysts continued to recommend a Sell.
Coinbase stock dropped approximately 69% in one year. Despite this significant decline, the analysts’ consensus price target indicates further downside. Wall Street has an average price target of $52 on COIN stock, implying 20.25% downside potential from current levels.
Bottom Line
A challenging macro environment and pullback in retail volume remain a drag. Mizuho Securities analyst Dan Dolev, who is bearish on the company, said, “COIN’s highly profitable retail investors remain unengaged in early 2023. What’s left are institutional volumes.” Looking ahead, Dolev sees “more doom and gloom.”
Overall, COIN’s top and bottom lines could remain under pressure in the near term. At the same time, its Subscription and Services revenue, along with its cost reduction measures, could offer some respite.
