Coinbase’s share price has plunged more than 90% since November 2021. Will its upcoming Q4 results show that the worst is over?
When does Coinbase Inc report earnings?
Coinbase is set to release its quarter four (Q4) financial results on 21 February 2023, after market closes.
Coinbase’s earnings – what to expect
Refinitiv estimates suggest that Coinbase’s upcoming Q4 revenue may come in at $592 million, which will be a 76.3% decline year-on-year (YoY). Expected net income for Q4 is pointing to a loss of $573 million, likewise a huge reversal from the $837 million profit from a year ago.
Another round of lacklustre results expected for Q4 but is the worst over?
With the bulk of its revenue derived from transactions in Bitcoin and Ethereum, there is little doubt that Coinbase’s share price tends to track the cryptocurrencies market closely. Over the past year, the digital currencies space has been trading in what is commonly known as the ‘crypto winter’ and the lack of any significant pick-ups in the Crypto 10 Index for Q4 have led market participants to price for another round of lacklustre results from Coinbase. With its share price being beaten down more than 90% since November 2021, that may leave market participants wondering if the worst has been priced. Refinitiv estimates suggest that Q4 could mark the worst YoY contraction in revenue (-76.3%) since its listing but both top and bottom-line may be set to gradually improve through 2023. With that, any forward-looking guidance from the company will be closely scrutinised to provide the much-needed conviction of any worst-is-over stance.
‘Subscriptions and services’ segment in focus to cushion weakness
While transaction volumes are expected to remain lower for longer, market participants will be on the lookout for any positive surprise from its ‘subscriptions and services’ arm, which includes custody, staking services and interest income, to provide some cushioning for its results. Current Q4 expectations are pointing to a 20.9% YoY increase in subscriptions and services revenue to $258 million, up from $213 million a year ago. Any positive surprise may further convince market participants of the company’s strategy in pivoting more towards subscription services. Its CEO previously laid down his aim to have more than 50% of Coinbase’s revenue in subscription and services. Currently, it stands at around 38% of overall revenue but largely comes on the back of depressed trading-fees revenue.
More risk-on environment aiding to drive retail interest in January 2023
With 59% of its total revenue derived from retail transaction revenue, it may be important for overall market sentiments to be more risk-on in order to drive more retail interest. A quick look at the Fear & Greed Index suggests that investor sentiments have been improving sharply since the start of 2023, with sentiments leaning towards current ‘greed’ levels. That has also brought back some flows into the cryptocurrencies space, providing a positive backdrop thus far for some recovery into the new year. The VIX currently hangs below its key 20 level, which generally corresponds to more risk-on sentiments in the markets but the alarm may be raised if the reverse occurs.
Coinbase’s shares – technical analysis
After a massive 90% plunge in share price since November 2021, Coinbase’s share price has been attempting to form a base over the past months. Recent bullish moves at the start of 2023 have seen the share price move above its 200-day moving average (MA), while also overcoming the Ichimoku Kinko Hyo, otherwise referred to as the Ichimoku Cloud, for the first time in more than a year. This may fuel some confidence that the preceding bearish run may be nearing an end. However, greater conviction may have to come from a break above the key psychological $100.00 level, which has weighed down prices back in August 2022. Near-term, a bearish shooting star formation, along with moderation in relative strength index (RSI) from overbought conditions, may raise the odds of a retracement. That will leave a potential retest of its 200-day MA on watch at the $60.00 level to see if its share price may form a new higher low.