Investors in Coinbase (COIN) are bracing for another lackluster round of quarterly results when the U.S.-based crypto exchange posts its fourth-quarter and yearly 2023 earnings report on Tuesday after the market close. Analysts surveyed by FactSet anticipate Coinbase’s revenue fell to $589 million in the final quarter of the year, down just a hair from the $590 million reported in the previous quarter.
The crypto exchange has struggled amid sharp price drops in cryptocurrency prices and continuing ripple effects from the collapse of rival exchange FTX. Analyst estimates for Coinbase’s annual revenue in 2022 are currently set for $3.1 billion, which would be a 61% drop from the previous year.
Crypto-related assets including Coinbase have rallied significantly so far in 2023. COIN is up over 95% year to date while bitcoin (BTC) crossed the $25,000 mark for the first time in six months on Thursday. For the year, bitcoin is up 47%, while the CoinDesk Market Index (CMI) is up more than 46% for the year.
However, regulatory actions by the U.S. government – including the Securities and Exchange Commission’s (SEC) shutdown of Kraken’s staking service in the U.S. as well as the Commission’s plan to sue Paxos for allegedly selling BUSD as an unregistered security – have cast a shadow over the industry’s recent bull run.
Investors will be especially looking for more guidance on what 2023 holds for the exchange, given the tumultuous start to the year for the crypto industry. SEC Chair Gary Gensler warned other platforms could be subject to investigations into their staking services, which could include Coinbase. The exchange’s staking business has potential for speedy growth if the SEC doesn’t crack down on the service.
JPMorgan analysts on Friday cut their price target for Coinbase shares from $60 to $52 due to ongoing regulatory risks to the company’s digital-focused businesses, including staking, USDC stablecoin and custody. The Wall Street bank wrote that it sees Coinbase’s staking business particularly at risk because it had anticipated Coinbase would auto-enroll its clients in Ethereum staking following the Shanghai Fork in March, which would have the potential to increase the exchange’s revenue by up to $1 billion.
As investors prepare for Coinbase’s fourth-quarter and yearly 2023 earnings report, they should be aware of the potential risks posed by the U.S. government’s regulatory actions. While the crypto industry has seen a strong rally so far this year, the SEC’s investigations into staking services could have a major impact on Coinbase’s future growth. Investors should pay close attention to the company’s guidance for 2023 and any updates on the regulatory front.