Shares of crypto trading company Coinbase (NASDAQ: COIN) recently announced its second-quarter results and reported sales of $2.23 billion with adjusted earnings of $6.21. Comparatively, Wall Street estimated Coinbase to report sales of $1.77 billion and earnings of $2.24 in the June quarter.
Does this massive earnings and revenue beat make Coinbase stock a good long-term buy for growth investors?
Coinbase ended Q2 with 68 million verified users
Coinbase stated that Q2 was a strong quarter and it experienced revenue growth across platforms. Retail Monthly Transaction Users (MTUs) soared 44% sequentially to 8.8 million in the second quarter, while verified users were 68 million.
Coinbase generated $2 billion in net revenue that includes $1.9 billion in transaction sales and $100 million in subscription & services revenue. It reported a net income of $1.6 billion while adjusted EBITDA was $1.1 billion in Q2.
Coinbase also explained that volatility in crypto prices is highly correlated with trading revenue which means a downturn is on the cards. In Q2 trading volume rose to $462 billion in Q2, up from just $28 billion in the year-ago period. This growth was driven by a 487% increase in MTUs and allowing the company to increase sales by 678% year over year.
In July 2021 retail MTUs and trading volume stood at 6.3 million and $57 billion respectively. While both these metrics have improved in August, they are significantly lower compared to the prior-year period. In 2021, the company has forecast average MTUs between 5.5 million and 8 million.
The leading cryptocurrency exchange now has 9,000 institutions on board and has 160,000 ecosystem partners that use its crypto tools and services to engage with their own customers. These services allow users to send, receive, borrow or even lend digital assets. Coinbase also offers a cold storage service to institutional investors.
At the end of Q2, Coinbase had approximately $180 billion in assets that account for 11.2% of total cryptocurrency assets, establishing the company as a market leader.
Wall Street remains optimistic about COIN stock
On the back of Coinbase’s quarterly results, several analysts increased their price targets on the stock. D.A.Davidson expects Coinbase stock to reach $650 million per share in the next year which is 113% above its current trading price of $264. Further,
- Wedbush increased its target price from $275 to $300 and maintained an “Outperform” rating
- Canaccord increased its price target from $285 to $325 and maintained a “Buy” rating. Analyst Joseph Vafi the adoption of digital assets, the emergence of blockchain and DeFi solutions, and a robust ecosystem to remain key drivers for Coinbase.
- Keefe Bruyette analyst Kyle Voigt also increased the stock’s price target from $265 to $275 and maintained a Market Perform rating on Coinbase.
What next for Coinbase stock?
It’s quite evident that the revenue of Coinbase is closely tied with the bull market in the cryptocurrency space. However, as the market cools down Coinbase should experience a deceleration in top-line going ahead.
However, the long-term prospects remain solid for Coinbase as digital assets are well poised to gain traction in several international markets in the upcoming decade. The cryptocurrency segment is still at a nascent stage making Coinbase a lucrative bet right now. Coinbase in fact aims to introduce a billion users to this space.
Wall Street forecasts Coinbase sales to increase from $1.27 billion in 2020 to $6.5 billion in 2021. However, revenue might decline by 9.9% to $5.67 billion in 2022 especially if the ongoing bear market persists.
Coinbase stock is currently trading at a massive discount given that consensus analyst price target estimates stand at $382.
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