Morningstar

Coinbase Earnings: Sequential Improvement, but Weak Cryptocurrency Trading Volume Still an Issue

Coinbase users clearly want a broader product set, but its deep reliance on cryptocurrency trading conditions is a liability.

Signage of the Coinbase logo.
Erica Denhoff/Icon Sportswire via AP
Securities in This Article
Coinbase Global Inc Ordinary Shares - Class A
(COIN)

Key Morningstar Metrics for Coinbase Global

  • Fair Value Estimate
    : $168.00
  • Morningstar Rating
    : ★★★
  • Morningstar Economic Moat Rating
    : None
  • Morningstar Uncertainty Rating
    : Very High

What We Thought of Coinbase Global’s Earnings

Coinbase Global COIN reported another round of weak earnings as cryptocurrency trading volume remained low despite a recovery in crypto prices in the second half of the quarter. Net revenue fell 35% from last year to $1.2 billion, while diluted earnings per share rose to $2.51 from $1.50.

Why it matters: Despite the sharp increase in net income, our thinking on Coinbase is mostly unchanged by these results. Third-quarter results benefited from a $715 million gain on cryptocurrency investments, without which Coinbase would have been effectively break-even.

  • Low cryptocurrency trading volume industrywide remains Coinbase’s primary problem. Concerningly, contrary to past trends, a more than 30% rally in cryptocurrency prices from the summer low has failed to spark a comparable recovery in trading volume.
  • Coinbase’s spot trading volume fell more than 54% from last year and 9.7% from last quarter to $134.5 billion. This led to a 44% decrease in transaction revenue to $590 million.

The bottom line: As we incorporate these results, we will maintain our $168 fair value estimate for no-moat Coinbase. We see the shares as roughly fairly valued at the current price, following their poor performance so far this year.

  • While Coinbase’s cryptocurrency trading business struggled more than we expected, impressive initial results from the firm’s new prediction market business offset it. Prediction market revenue reached a $200 million annual run rate, already closing in on the $256 million we had initially expected for 2027.
  • All in all, Coinbase’s third-quarter results prove both the opportunity and the need for the firm’s new “everything exchange” strategy. Coinbase users clearly want a broader product set, but its deep reliance on cryptocurrency trading conditions is a liability.

Coming up: On a more positive note, we expect Coinbase to directly benefit from rising interest rates through its stablecoin business.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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