Coinbase Beats Sales Forecasts but Warns of 'Modest Headwinds' in Q3

Coinbase Global Inc. on Thursday reported second-quarter sales that beat Wall Street's expectations, but the cryptocurrency exchange warned of "modest headwinds" in the third quarter

Coinbase Global Inc. on Thursday reported second-quarter sales that beat Wall Street's expectations, but the cryptocurrency exchange warned of "modest headwinds" in the third quarter.

Coinbase said it expected third-quarter subscription and services revenue of between $530 million and $600 million, a bit below analysts' forecasts.

The company also said it expected a 3% drop in the average price of ether in July, and higher costs related to efforts to spur wider use of USDC, a stablecoin pegged to the U.S. dollar. Stablecoins are a key element of the crypto-trading infrastructure.

Coinbase (COIN) shares rose 1.8% after hours on Thursday after the company reported adjusted earnings of 14 cents a share, beating expectations for 95 cents a share. Revenue also beat forecasts for $1.39 billion, coming in at $1.45 billion.

The stock finished regular trading down 5.2%.

Coinbase reported second-quarter net income of $36.2 million, or 14 cents a share, contrasting with a loss of $97.4 million, or 42 cents a share, in the same quarter last year. Revenue, which comes from things like trading fees and subscriptions, roughly doubled to $1.45 billion.

Analysts polled by FactSet expected Coinbase to earn 95 cents a share, on revenue of $1.39 billion.

Coinbase shares were up 1.8% after hours on Thursday. The stock finished regular trading 5.2% lower.

Still, Coinbase's stock is up around 22% so far this year, and Wall Street has been upbeat on the prospect of more regulatory clarity and deregulation and mainstream adoption.

The Securities and Exchange Commission earlier this year approved exchange-traded funds tied to bitcoin (BTCUSD). The Supreme Court also this summer overturned the so-called Chevron doctrine, a move that undercut federal agencies' influence on regulations. And the crypto industry's political influence - in part through a super PAC called Fairshake, for which Coinbase has offered a hefty amount of financial support - has grown.

Former president and Republican nominee Donald Trump last month said he would build a strategic bitcoin reserve if he won this year's presidential election. However, as Coindesk noted on Thursday, the presidential race has tightened, as Vice President Kamala Harris' campaign builds momentum after President Joe Biden's decision to leave the race - and traders are still processing economic data and appetites for riskier investments like crypto.

But Oppenheimer analysts said the outlook for Coinbase was still favorable.

"When good actors in the industry are treated fairly, and sensible and predictable regulations/policies are implemented, blockchain adoption should continue, especially as more [traditional finance] powerhouses enter the space," they said in a research note last month.

"With increasing regulatory clarity, adoption and potential S&P 500 inclusion, we believe Coinbase's long-term thesis is highly underappreciated, given the massive attention on current volume and regulations."