Coinbase Shares Surge Despite Q4 Earnings Miss

Shares of Coinbase (COIN) experienced a notable jump of 12% on Friday, surprising the market despite the cryptocurrency exchange falling short of fourth-quarter earnings expectations. Analysts are split on their outlook, reflecting both caution regarding short-term challenges and optimism surrounding the company’s evolving business model.

Q4 Financial Performance Overview

In its fourth-quarter report, Coinbase disclosed a net revenue of $1.71 billion, which was below Wall Street’s expectations of $1.81 billion. Additionally, the company reported its core operating profit (adjusted EBITDA) at $566 million—short of the anticipated $653 million. Under generally accepted accounting principles (GAAP), Coinbase recorded a net loss of $667 million. This loss was primarily attributed to a substantial $718 million unrealized loss on its investment portfolio and a $395 million loss related to strategic investments.

Analyst Reactions: A Mixed Bag

Barclays analyst Benjamin Budish characterized Q4 as “a miss across the board,” noting lower-than-expected transaction and subscription revenues coupled with rising operational costs. Following the report, he adjusted his price target for Coinbase shares down to $149 from $258. Budish emphasized that trading activity and stablecoin revenue remain critical components of Coinbase’s performance.

Conversely, Benchmark analyst Mark Palmer maintained a more optimistic long-term perspective. While acknowledging that headline results fell short, Palmer highlighted positive trends such as the growth of Coinbase’s derivatives business and expanding product offerings. He retained a buy rating on Coinbase stock but reduced his price target from $421 to $267.

Clear Street’s Owen Lau pointed out that consumer monetization at Coinbase faces challenges, particularly with the retail take rate decreasing from 1.43% in the third quarter to 1.31% in the fourth quarter. This decline, influenced by a shift towards advanced trading tools and the Coinbase One subscription model, has diminished per-trade revenue, although stronger customer engagement has helped offset some losses. Lau adjusted his price target down to $277 from $344, citing ongoing pressures from a crypto market downturn and weak retail participation.

Long-Term Positioning: A Strategic Shift?

Despite the less-than-ideal earnings report, Lau maintains that Coinbase’s long-term outlook appears promising. The firm now operates 12 business lines which each generate over $100 million in annualized revenue, including two that exceed $1 billion. Its base-layer network, derivatives platform, and expanding stablecoin infrastructure indicate a move towards broader utility beyond merely trading.

JPMorgan also scaled back its price target for COIN in response to the earnings results, noting pressures on near-term earnings.

Commitment to Long-Term Growth

Despite the mixed reviews from analysts, Coinbase reiterated its goal of remaining adjusted EBITDA positive across various market cycles. The company boasts a strong liquidity position with $14.1 billion in total available resources and continues to actively repurchase stock while accumulating Bitcoin using a portion of its operational income.

Conclusion

Coinbase is navigating a challenging landscape but is making strategic moves to diversify its business and strengthen its market position. While immediate earnings may be under stress, the company’s long-term potential is fueled by a robust expansion strategy and an increasing focus on sustainable revenue streams.