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Crypto exchange Coinbase reported stronger-than-expected fourth-quarter profits, boosted by increased trading activity in Bitcoin and other cryptocurrencies after the U.S. election.

Crypto exchange Coinbase reported stronger-than-expected fourth-quarter profits, driven by increased trading activity in Bitcoin and other cryptocurrencies after the U.S. election.

After Donald Trump’s win in the November presidential election, excitement around cryptocurrencies surged, propelling Bitcoin’s value past $100,000 in the quarter. Investors grew optimistic about the possibility of more crypto-friendly regulations from the new administration.

Coinbase’s net revenue for the quarter amounted to $1.3 billion, surpassing analysts’ estimates of $1.16 billion, as reported by TipRanks. The exchange’s adjusted earnings per share (EPS) reached $3.54, exceeding the anticipated $2.97.

Compared to the third quarter, when revenue declined by 12%, it rose by 11% to $1.24 billion. However, EPS decreased from $6.04 to $3.54.

For the full year of 2020, Coinbase reported revenue of $3.25 billion and EPS of $11.71.

Coinbase’s stock price increased by over 10% in extended trading on Thursday.

Those figures largely align with the company’s own projections made in early February, where it estimated revenue between $1.1 billion and $1.2 billion, and adjusted EPS ranging from $2.88 to $3.18.

The company’s strong performance can be attributed to increased user activity and trading volumes in the fourth quarter, particularly for Bitcoin.

During the period, Coinbase’s monthly active users (MAU) surged to 9.2 million, a significant rise from the previous quarter’s 5.4 million.

Coinbase’s platform facilitated Bitcoin transactions worth over $150 billion in the fourth quarter, while other cryptocurrencies generated transactions valued at approximately $75 billion.

Despite the positive results, Coinbase faces challenges in the new year, including a potential slowdown in the crypto market and stiffer competition from other exchanges.

Coinbase anticipates revenue for the first quarter of 2021 to be in the range of $530 million to $590 million, with adjusted EPS estimated at $1.40 to $1.52. The company’s own projections are closely aligned with the average estimates of analysts, who predict revenue of $566.4 million and EPS of $1.48.

The company’s stock price has experienced a surge of over 700% since its initial public offering in April 2020, positioning it among the top-performing stocks in the S&P 500. However, the stock is still trading at a relatively high multiple of 50.57 for the next 12 months’ earnings, indicating that further gains may be limited.

Moreover, Coinbase’s ability to generate consistent profits remains a key concern for investors. The company’s net income decreased significantly in the third quarter, and although it rebounded in the fourth quarter, it is still relatively low considering the company’s large size and revenue.

Overall, Coinbase’s strong performance in the fourth quarter is a testament to the company’s ability to capitalize on market trends and maintain its position as a leading crypto exchange. However, the company faces several challenges in the new year, which could impact its financial performance and stock price.

It's important to note that this article is based on a press release issued by Coinbase and does not include any original reporting or analysis. The figures and statements cited in this article should be attributed to Coinbase. For the latest rates, financial advice, and professional opinions, consult the relevant sources. We are not responsible for any decisions made based on the information provided in this article.

This article has been written with the assistance of AI and does not include any input from Benzinga.

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