Coinbase stock sinks as weak crypto market leads to another quarter of loss

Coinbase Global (COIN) stock tumbled more than 10% early Friday after the company posted a wider-than-expected second quarter net loss on Thursday, marking its third quarter in the red since the crypto market began to drawdown from its October highs. 

The company reported a net loss of $359 million, or $1.36 per share. That compared to a profit of $1.43 billion, or $5.14, in the year-ago period. Analysts anticipated a net loss of $0.44 per share.

Coinbase’s stock is down over 32% so far this year.

Beyond the effect of falling crypto prices on Coinbase’s investment holdings, its core revenue streams also weakened. Net revenue fell 17% from a year ago to $1.15 billion. The company’s adjusted EBITDA dropped 59% from the year-ago period to $208 million, missing analyst expectations by a third.

“We like the direction… but the near-term setup is tough,” Mizuho analyst Dan Dolev told clients on Friday. The bank said it is lowering its price target for Coinbase’s stock from $200 to $155 per share.

In the second quarter, a blistering rally in semiconductors and other AI-related stocks, along with rapid geopolitical shifts in the ongoing Iran war, brought a windfall to investment bankers and stock traders at Wall Street banks.

Coinbase’s investing app competitors with less dependence on crypto, including Robinhood (HOOD) and Charles Schwab (SCHW), reported sharply higher revenue from trading fees too.

But the crypto market faced softer asset prices and lower volatility, which translated into muted trading for the major crypto exchange. The company said its transaction revenue fell 22% from the year-ago period to $600 million.

Read more: How to navigate a crypto meltdown

Coinbase CFO Alesia Haas acknowledged crypto’s “down market” but pointed to record paid membership in Coinbase One as evidence that customers remained engaged in the quarter.

Coinbase’s nontrading subscription and services revenue, which includes income from stablecoins, interest and financing fees, crypto staking and custody, fell 12% from a year ago to $555 million. Even so, the category helped cushion revenue from declining trading fees, accounting for 48% of Coinbase’s quarterly revenue.

“At any given time in trading, there’s always something that’s up and something that’s down,” CEO Brian Armstrong told analysts Thursday, adding that part of the firm’s strategy depends on “having all the shelves stocked” to capture demand for whichever market is surging.

Coinbase also said at the second quarter pace, its newer prediction markets offering will bring in $100 million in revenue this year, unchanged from their expectation last quarter.

In May, Coinbase was the first US exchange granted approval to offer customers crypto perpetual futures, a contract that lets traders bet on the price of a digital asset with leverage and no fixed maturity date. The firm is waiting for a green light from regulators to offer this same product for stocks.

Coinbase is also waiting for crypto’s major bill, the Clarity Act, to move to a Senate vote, though the odds of passage this year have dropped significantly in recent days. The bill’s passage would move most crypto trading oversight away from securities regulation. That would come after federal securities regulators went after Coinbase and other crypto exchanges during the last administration.

Armstrong said if the bill doesn’t pass, it’s “business as usual” for Coinbase, adding, “on margin, it’s better if the Clarity Act passes.”

“It creates durability through multiple administrations. People can make longer-term investments,” Armstrong added.

David Hollerith covers a range of developments throughout the financial sector, from Wall Street to banking and asset management to crypto and fintech. Email him at david.hollerith@yahoofinance.com. Follow him on X at @DsHollers.

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