Coinbase Global's Challenging Q3 Preview: Analyst Expects Trading Volume To Slump 49% Y/Y

Oppenheimer analyst Owen Lau reiterated the Perform rating on Coinbase Global, Inc. COIN.

COIN will publish its Q3 results on Thursday, November 2, 2023, after market close.

Coinbase looks to have another challenging quarter, the analyst thinks. The stock is down ~38% from mid-July, pricing in the delayed decision of spot Bitcoin ETF applications and the continued weak trading volume and USDC market cap. 

Lau estimates that trading volume will decline 49% Y/Y and 16% Q/Q to $77 billion in Q3. 

The average market cap of USDC was down from ~$30 billion on June 30 to ~$26 billion on September 30 but has recently stabilized at ~$25 billion. 

On the positive side, a favorable ruling from the court in Coinbase's lawsuit and the potential approval of spot Bitcoin ETF could trigger a short squeeze in the near term.

The court victories in Ripple and Grayscale lawsuits bode well for Coinbase's lawsuit brought by the SEC. 

Judge Torres, in the Ripple case, even rejected the SEC's appeal, but the analyst believes the fight continues. 

The comment from a recent Senate hearing indicated that the Senate is not as willing as the House to move ahead with crypto bills.

Longer term, international expansion, U.S. derivatives trading, higher staking, and Base could gradually add more incremental revenue outside spot trading, Lau writes.

Other bright spots lie in the rising interest rate and increased staked ratio from 13% in Jan to 23% in October.

Lau slightly raised 3Q revenue and adjusted EBITDA estimates to $673 million and $82 million from $672 million and $67 million, respectively, primarily driven by higher Subscription and services revenue.

The analyst estimates Adjusted EBITDA 30% below consensus. However, the analyst believes that Coinbase can still manage to generate positive Adjusted EBITDA at the current level of trading.

Price Action: COIN shares are trading lower by 2.4% to $75.49 on the last check Thursday.