Coinbase reports a 13% sequential decline in transaction revenue | CPT PPP Coverage

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• Coinbase reported its second-quarter financial results on Thursday.
• Berenberg analyst Mark Palmer sees downside in “COIN” to $39.
• Coinbase stock has nearly tripled since the start of the year 2023.

Shares of Coinbase Global Inc wobbled but eventually ended flat in extended hours today even though the crypto exchange reported market-beating results for its fiscal second quarter.

Why is Coinbase stock unimpressed in after-hours?

The stock is primarily responding to weakness in transaction revenue that printed at $327 million – down nearly 13% sequentially. Trading volume also tanked to $92 million versus $145 million in the prior quarter.

Also a negative was interest income that declined about 17% on a quarter-over-quarter basis to $201 million. Reacting to the earnings print in an email, Mark Palmer – a Berenberg analyst wrote:

Interest income and staking revenue appear to be at risk going forward given the ongoing declines in USDC’s market cap and regulatory challenges to staking programs.

USDC holdings brought in $151 million in interest income to Coinbase in Q2.

Notable figures in Coinbase Q2 earnings report

• Lost $79 million versus the year-ago $430 million
• Per-share loss also narrowed from $1.98 to 34 cents
• Revenue tanked roughly 35% YoY to $773 million
• Consensus was 76 cents loss on $628 million in sales
• Subscription and services revenue printed at $335 million

In June, Coinbase Global Inc was sued by the SEC that accused it of violating the U.S. securities laws (read more).

Should you buy Coinbase stock?

Coinbase also revealed in a letter to shareholders today that transaction revenue stood at $110 million in July.

The crypto exchange now forecasts at least $300 million in subscription and services revenue in its current financial quarter. According to Berenberg’s Palmer:

Guidance was muted, and adjusted EBITDA print included a huge adjustment for stock-based compensation – an area management had said it would look to reduce.

Note that Palmer has a $39 price target on Coinbase stock that warns of a more than 50% downside from here. In his own words, shares of the crypto company are uninvestable at least in the near term.