User growth slowed in the third quarter, and revenue came in below expectations. Coinbase reported revenues of $1.3 billion — falling short of estimates of $1.6 billion. EPS were $1.62 — also below Wall Street estimates of $1.81.
That makes sense, as the crypto market peaked in the spring and has spent about six months taking a breather. It’s only been in the past few weeks — after the third quarter ended — that the space has trended higher.
The shares took a hit, after the report, but the stock has been rallying pretty strongly along with the cryptocurrency space, so they gave up just over a week’s worth of gains.
Interest in the cryptocurrency space is rising. While trading interest may slow from time to time, it’s clear that many see Bitcoin and other cryptocurrencies as a must-own asset class. Sure, many are starting with 1% or 2% of their wealth. But given the potential returns in cryptocurrencies, that small stake could make a huge difference for a portfolio.
Coinbase’s value comes from being the largest cryptocurrency brokerage. It’s also the most respected one, as the SEC has asked them specifically to come up with a regulatory framework for the space.
More important than size is the fact that it’s the go-to cryptocurrency broker for institutional investors. Think hedge funds, family offices, banks, insurance companies, and so on.
There’s no existing financial institution that can replicate what Coinbase does or its scale without spending billions of dollars to do so. It’s truly in a unique position. And it’s one of the few companies this year to go public while already making a profit.
In short, the latest earnings report shows that traders are still concerned with company earnings in the short term. That’s good. It shows the market isn’t at a peak yet. When it is, the market will shake off earnings instead.
Overall, since it went public, Coinbase has traded more in line with Bitcoin and the crypto market in general. The latest divergence may indicate that it will trade more on its own as a company in the future.
That’s also a good sign, as crypto bear markets can be harsh. Chances are the final quarter of 2021 will be good for cryptos, and good for Coinbase. Keep accumulating.