Coinbase Reports Strong Q1 Results, But Warns 'Challenges' Lie Ahead
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Coinbase Reports Strong Q1 Results, But Warns 'Challenges' Lie Ahead

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2 years ago

Some analysts are predicting that COIN's share price could fall 65% as the exchange faces greater levels of competition.

Coinbase Reports Strong Q1 Results, But Warns 'Challenges' Lie Ahead


Coinbase has released finalized results for the first quarter of 2021 — with total revenues of $1.8 billion three times higher than what was seen in the final three months of 2020.

The exchange’s net income of $771 million was right in the middle of the $730 million to $800 million range set when estimated results were released before its direct listing in April.

Shareholders hoping that the figures will give COIN’s stock price a boost may be disappointed. We knew the platform’s Q1 performance would be along these lines, and there are growing concerns that such box office figures may not prove sustainable.

Coinbase acknowledged this in its letter to shareholders, writing:

“Despite our strong Q1 results, the rapid expansion of the cryptoeconomy also creates challenges for Coinbase. Competition is increasing as new market entrants join the cryptoeconomy every month. Our competitors are supporting certain crypto assets that are experiencing large trading volume and growth in market capitalization that we do not currently support, as well as offering new products and services that we do not offer.”

Bitcoin’s recent slump has also cast a cloud over Coinbase’s share price. It closed Thursday’s trading session at $265.10, meaning it remains perilously close to the reference price of $250 that was set by the Nasdaq before its stock market debut.

Trouble Ahead? 

Among those concerned about Coinbase’s future prospects is David Trainer, the CEO of New Constructs.

He made dire warnings about the exchange ahead of its direct listing, warning that a mooted $100 billion valuation was “ridiculously high.”

Although the company is currently worth $52 billion — barely half this level — he still believes that its overvalued, and warned COIN’s share price could tumble by 65%.

In a note to investors on Tuesday, Trainer had written:

“Coinbase is not likely to fulfill the profit expectations baked into the stock’s current valuation of $58 billion due to rising competition in the cryptocurrency trading space, which should reduce the company’s market share and pricing power.”
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