Coinbase stock price crashed by over 10% on Friday after the company published its financial results and as Bitcoin plunged below $115,000. COIN dropped to $335, down by over 24% from its highest point this year. This article explores the top takeaways in its earnings report and the implications to the stock.
Coinbase revenue growth decelerated in Q2
The first main takeaway in Coinbase’s earnings report is that its business remained under pressure in the second quarter, with its key divisions seeing tepid growth.
Coinbase’s total revenue rose to $1.42 billion in the second quarter from $1.37 billion a year earlier. This revenue was much lower than what it made in the previous quarter.
The revenue slowdown was understandable as the crypto market remained in a tight range during the quarter. Historically, Coinbase thrives when Bitcoin and other altcoins are in a strong bull run.
Coinbase’s transaction revenue plunged to $764 million from $780 million in the same period last year. It also dropped sharply from $1.26 billion from the first quarter.
This slowdown was offset by the subscription and services revenue, which rose from $599 million to $655 million. This is a significant business with resilient segments, including stablecoins, blockchain rewards, and other subscription-based revenue streams.
Read more: Bitcoin price prediction for August: buy or sell?
Custody business not thriving despite asset growth
The other key takeaway in the Coinbase earnings report was that it is not necessarily benefiting from its custody business. While the total assets under custody grew to $247 billion in Q2 and the market share rose to 80%, the fee growth was not all that strong.
The company blamed this on the ‘blended fee rates driven by customer mix and lower non-BTC asset prices.’ This business, together with its Coinbase One solution, explains why the “other subscription and services” revenue dropped by 15% QoQ.
Coinbase costs are jumping
The other notable takeaway in the report was that the company’s costs are accelerating, which is affecting its business. Management expects that its technology and development and SG&A costs will be between $800-$850 million in the third quarter.
These costs are growing because of its headcount is accelerating at a faster pace than expected. These workers are growing in its international markets and new product launches. Some of the growth metrics will be in the form of stock-based compensation.
Valuation concerns persist
Further, there are signs that the Coinbase stock price is highly overvalued considering that its revenue growth is not all that strong.
While analysts see a 40% revenue growth in the third quarter, the annual figure is expected to be 12.9% to $7.42 billion. Analysts also predict a 2026 revenue of $8.26 billion.
At the same time, Coinbase has a forward price-to-earnings ratio of 70, which is much higher than the sector median of 10. The multiple is much higher than other companies, including NVIDIA, which has a higher growth rate.
Coinbase stock price analysis
COIN stock chart | Source: TradingView
The daily chart shows that the COIN stock price crashed from the closing price of $377 to $333 in the premarket today. It crashed below the key support level at $348, its highest point in December last year. The Relative Strength Index (RSI) and the MACD continued falling.
Therefore, the stock will likely remain under pressure in the near term and then bounce back if Bitcoin and other cryptocurrencies recover.
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