Coinbase Global Inc. plunged 13% from an all-time high on Tuesday afternoon, after revealing that a summer slowdown in cryptocurrency trading caused sales to drop.
Coinbase's revenue fell in the third quarter by more than 40% from the previous three months, as cryptocurrency trading volumes. Coinbase, which offers an exclusive platform for trading cryptocurrencies, felt the pain that users were not trading at the same levels of previous months.
"The story of our third quarter really centers on the lower volatility that we saw in the quarter," CFO Alesia Haas said in a conference call Tuesday. โOur monthly transaction users and trading volumes and therefore transaction fee income correlate with volatility. So it is a very important factor in our finances. "
Coinbase's
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finances did not live up to expectations. The company reported third-quarter earnings of $ 405.3 million, or $ 1.62 per share, down from $ 81.3 million in earnings in the same quarter a year earlier, before the crypto trading platform made public. Total revenue increased to $ 1.31 billion from $ 286.7 million a year ago, but declined sequentially from $ 2.23 billion in the second quarter, while transaction revenue totaled $ 1.09 billion, down from $ 1.93 billion in the second trimester.
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Analysts were expecting, on average, earnings of $ 1.82 per share on sales of $ 1.61 billion, with transaction revenue of $ 1.31 billion, according to FactSet. Shares of Coinbase plunged 13% in the after-hours trading session, after closing up 1% at $ 357.39, a closing record for the shares.
Analysts largely expected Coinbase's revenue to decline from the second quarter, the first full period of the platform as a public company. They tracked a decline in crypto trading activity in the second quarter, especially in July, and Square Inc.
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seemed to confirm that trend in its earnings report late last week.
See also: Everything you need to know about Coinbase as a public company
"While July was particularly slow, activity levels rebounded in August and more so in September," JP Morgan analysts wrote in a preview of this week's earnings report. "Until now, October has been active for cryptocurrency trading, which is not unexpected given the large flow of news and the appreciation of tokens."
Analysts, who maintained their overweight rating and modestly raised their price target to $ 375 from $ 372 in the note, posited that Coinbase has held up better than the broader industry amid the decline, with volumes dropping around 25% to Coinbase while the largest cryptocurrency trading volumes declined closer to 40%.
Coinbase executives were guided by such a decline in their second quarter results, predicting three months ago that monthly trading users, or MTUs, "and total trading volume will be lower in the third quarter compared to the second. trimester". However, it appeared that a steeper drop in retail transaction revenue compared to retail trading volume (38% vs. 44%) reduced net revenue more than expected.
"The third quarter saw a dramatic drop in the retail buying rate, probably one of the most dramatic compressions in Coinbase's short history as a public company," Mizuho analysts wrote after the results appeared. "This helped drive the significant 'loss' (nearly 20%) in revenue versus consensus expectations."
CFO Haas addressed these questions directly in Tuesday's conference call.
"We want to be clear: there were no changes to our retail transaction fees in the quarter," he said. โThe decline you see is the result of mathematics. It is a result of the fact that in periods of low volatility, we see our low dollar volume traders become less active. We have seen this transaction reversed in October. "
In Tuesday's forecast, Coinbase executives said the October figures were much higher than what they reported for the third quarter (11.7 million MTU and $ 186 billion in monthly trading volume) and said bluntly : "We expect retail MTUs and total trading volume to be higher in Q4 compared to Q3."
Coinbase's annual forecast calls for MTUs of 8 million to 8.5 million, and an average annual net transaction revenue per user each month in the high $ 50.
For the third quarter, Coinbase reported 7.4 million users transacting monthly, while analysts on average expected 6.85 million. Total trading volume was $ 327 billion, down from $ 462 billion in the prior quarter, with bitcoin.
BTCUSD,
volume comprising 19% of that total, ethereum
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comprising 22%, and other crypto assets taking the other 59%, the largest percentage of volume dedicated to offerings other than bitcoin and others Coinbase has reported.
Read: The reasons for cryptocurrencies' record rally to $ 3 trillion, as bitcoin and ether hit new highs
Coinbase shares They were sold for $ 381 when they entered the public market through a direct listing in April and surpassed $ 400 in that session, but the price has not yet returned to those heights. However, stocks posted all-time closing highs in the last two sessions in a row.
