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Coinbase faces Q1 earnings challenge as crypto markets weaken

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Cryptocurrency exchange Coinbase Global Inc. (COIN) will continue to face headwinds as the company is expected to report first-quarter results on Tuesday after the market close.

Coinbase already informed investors during its fourth quarter earnings report, it expects lower trading volumes and monthly trading users given a decline in crypto asset volatility and macro factors. As a result, Wall Street analysts mostly cut their earnings and volume estimates ahead of Tuesday’s release.

According to FactSet, the analyst consensus estimate for Coinbase’s first quarter is $1.5 billion in revenue and an adjusted earnings loss of one cent per share.

“Despite the slowdown in crypto activity, [the first quarter] has been marked by some sudden price swings which can lead to higher volumes in the event of heightened volatility,” said John Todaro, equity research analyst at investment bank Needham & Co. in a note to clients. “Rather, the period was marked by a steady and continuous decline with periods of range-limited markets leading to relatively low volumes.”

Todaro expects aggregate transaction volumes of $322 billion in the first quarter, down from its previous estimate of $355 billion. He maintained a buy recommendation on the stock.

The start of the second quarter also failed to inspire analysts, with some anticipating more headwinds in Coinbase’s outlook.

“Average daily trading volumes on COIN have averaged $2.3 billion so far in 2Q, about 30% below 1Q levels,” said Dan Dolev, equity research analyst at Mizuho. , in a note earlier this week. “On a quarterly basis, this would imply approximately $210-215 billion in Q2 volumes.”

Dolev says the consensus revenue forecast for the second quarter is “too optimistic” and maintains a neutral rating on Coinbase shares.

NFT launch

Coinbase’s NFT segment will attract some attention as investors get a glimpse of its early days and engagement with users. The company recently launched its beta version, which showed low usage statistics.

Still, some remain optimistic that Coinbase’s NFT segment will help establish the company as a one-stop-shop for mainstream crypto adoption.

“The NFT movement also underscores our current view that perhaps the ‘most boring’ part of the COIN investment case at this point is the spot price of bitcoin and that the future of this innovative venture is significantly wider and broader than the primary digital asset and its associated trading volumes,” Canaccord Genuity analyst Joe Vafi told clients in a note in late April.

Coinbase shares have fallen nearly 60% this year, while the broader equity markets and the Nasdaq continue to decline, with the Nasdaq dropping around 22%. Meanwhile, the price of bitcoin has fallen around 26% over the same period.

Read more: The Coinbase NFT market goes live. Can it compete with OpenSea?