Coinbase Glb Rg-A’s Q2 results fell short of Wall Street estimates, but they are confident their balance sheet will help them survive this crypto winter according to David Hollerith at Yahoo Finance.
In addition to posting a net loss of $1.1 billion, with $453 million coming from a decline in crypto assets on Coinbase’s balance sheet, the company missed Wall Street expectations for revenue, trading volume and assets. kept on the platform.
“Between the crypto sector’s liquidity crisis in June and the 8 mentions of “Crypto Winter” during its Q2 earnings call on Tuesday, the fate of early large-cap crypto stocks hinges on whether the exchange has enough cash reserves,” according to Lisa Ellis, a partner at MoffettNathanson.
In a post-second quarter earnings note, Ellis noted that while Coinbase reported $5.68 billion in cash and cash equivalents at the end of the quarter, it also has an additional $500 million in Circle stablecoin USDC, which which lifts cash resources above its first quarter level to $6.2 billion.
“Coinbase has no real urgency or concern around liquidity,” Ellis explained.
Looking at the exchange’s cash burn rate in a research note following the company’s second-quarter earnings call, Ellis sees the company’s cash burn rate drop to around $200 million per quarter after spending 1 billion dollars in the first half of 2022.
“The implication of that is that even if this crypto winter persists for another six quarters, which would be typical, lasting a couple of years, they’re still going to be around $5 billion in cash,” Ellis added.
Chris Brendler, senior analyst at investment banking firm D.A. Davidson, too, is showing more confidence in Coinbase following the Q2 results.
Looking at the exchange’s profitability of retail trading fees (the company’s transaction percentage rose to 1.34% vs. expectations of 1.24%), Brendler said in a Wednesday note that the biggest positive in Coinbase’s results is that “Casual retail activity is holding up better than we would have expected.”
Admitting that any “short-term outlook remains cloudy” for Coinbase, Brendler raised his price target on the stock from $90 to $100. The firm expects Coinbase’s vital earnings line (average monthly revenue per active user) to bottom out during the third quarter.
“The recent rally increases our confidence in an eventual recovery once the Fed really changes course. Until then, Coinbase is well positioned to weather the winter and emerge stronger (and leaner) on the other side,” Brendler added.
Coinbase Glb Rg-A is trading this Friday at $86.61, but the price is falling slightly within the last bullish gap, and the 70-period moving average is below the last candles.