Coinbase COIN Expected to Report Strong Revenue Numbers in Fourth-Quarter Earnings

Coinbase (COIN) is expected to announce strong revenue numbers on Thursday when it reports its fourth-quarter earnings after the bell. Analysts are predicting a robust quarter for the popular crypto exchange, as trading volume picked up in the final days of the year.

According to FactSet consensus estimates, Coinbase’s revenue is expected to increase to $1 million from $1 million in the previous quarter. Trading volume and earnings per share (EPS) are also anticipated to have seen a significant uptick.

“We expect Q4 to be a strong quarter for the company as volumes returned to the space and interest income held up,” said John Todaro, an analyst at investment bank Needham, who has a buy rating on the stock.

The surge in trading volume is not surprising, as the digital currency market experienced a recovery in prices during the fourth quarter, buoyed by the approval of spot bitcoin exchange-traded funds (ETFs) to trade in the U.S. This trend is evident from the earnings of Coinbase’s trading platform peer, Robinhood, which reported a 50% increase in crypto revenue in the fourth quarter.

Analysts like Chase White from Compass Point, who has a buy rating and expects $1 million in revenue, are optimistic about Coinbase’s performance in the fourth quarter. FactSet consensus estimates predict that Coinbase’s revenue will increase to $1 million from $1 million in the previous quarter, with trading volume expected to reach $3 billion compared to $2 billion in the third quarter.

Despite the positive outlook for Coinbase’s fourth-quarter results, analysts have mixed opinions about the impact of the company’s involvement in spot bitcoin ETFs. Some analysts believe that Coinbase’s custodial service for eight of the ten spot bitcoin ETFs could have negative implications for the exchange in the future.

Mizuho analyst Dan Dolev, who has an underweight rating on the stock, pointed out that outflows from ETFs, particularly Grayscale’s Bitcoin Trust (GBTC), have outpaced inflows for the funds that Coinbase provides custodial services for, dragging down Coinbase’s ETF-related assets under management (AUM).

On the other hand, Devin Ryan, Director of Financial Technology Research at Citizens JMP, believes that the ETFs are driving more interest in the space and extending well beyond the price of bitcoin. He also highlighted the significance of Coinbase’s recently launched offshore derivatives exchange, which is attracting significant volume.

Overall, analysts are looking for guidance on expenses from Coinbase, as it continues to invest in its platform. Despite the launch of bitcoin ETFs, some analysts do not expect Coinbase to lower trading fees on the exchange, as they believe the company’s market share is more protected than many on Wall Street think.

The shares of Coinbase rose about 2% on Thursday, along with most crypto-linked stocks, as the price of bitcoin climbed past $40,000. Investors will be eagerly awaiting Coinbase’s fourth-quarter earnings report to see if the company has indeed delivered strong revenue numbers as expected.