Goldman Sachs and Compass Point Raise Expectations for Coinbase Second Quarter Profits Exchange Seeks to Offer Different Financial Services to Reduce Percentage of Revenue Currently Coming from Trading Fees
Goldman Sachs and Compass Point expect Coinbase (ticker COIN) to beat analysts’ expectations for second quarter earnings, according to two reports released by the respective financial institutions.
In a note to clients, Goldman Sachs analysts estimated that the cryptocurrency exchange’s earnings per share will be 11% higher than expected. Compass Point researchers also increased their earnings per share projections from $ 2.57 to $ 2.90.
The Goldman Sachs memo cited increased crypto volatility as the reason for the increase in trading volume and income, especially through trading fees, which historically have accounted for the majority of Coinbase’s income.
Compass Point researchers pointed out that Coinbase’s trading volumes saw an increase at the start of the second quarter, but momentum has slowed since. The company is therefore lowering its earnings per share estimate for 2021/2022 to $ 6.97 / $ 3.20 from $ 9.28 / $ 4.25, according to the report.
Compass Point estimates that COIN’s market share increased from 6.5% in the first quarter to 5.4% in the second quarter. The company sees revenue from subscriptions and services increase in the coming months.
The news comes shortly after Coinbase joined many crypto asset management and exchange companies in offering high yield accounts. Coinbase customers can now earn 4% per year by lending their coin in USD (USDC).
Coinbase’s account is not FDIC or SIPC insured and offers less interest than many similar competing accounts, such as Celsius and Nexo, which offer 13% and 12% respectively.
The exchange also recently launched its bitcoin lending program, where customers can use their crypto holdings as collateral for loans. Eligible users can receive up to $ 20,000 in credit with an 8% interest rate for bitcoin-backed loans for contracts of 12 months or less.
The new products come after Coinbase executives signaled that transaction fees and transaction volume will not be large enough to support the exchange in the future.
“We are looking to operate the company at roughly breakeven in terms of profitability, smoothed over time, for the time being,” Coinbase said in its first quarter financial results.
Coinbase is expected to release its second quarter results on August 12.
