Coinbase stock reported their Q3 2021 earnings report on 9th November 2021. The quarter was dominated by lower crypto trading volumes, however with a few surprises. We take a look at the Coinbase Q3 2021 Earnings Report.
COIN Q3 2021 Earnings Report – Headline Results
Coinbase reported a solid quarter albeit in a highly volatile quarter for the underlying quarter. 200million users on the crypto
- Verified Users grew to 73 million and retail Monthly Transacting Users (MTUs) were 7.4 million
- Global crypto spot trading volumes declining 37% in Q3 as compared to Q2
- Coinbase outperformed the market with total trading volumes of $327 billion, a 29% decline in the same period.
- Increasing Institutional transaction volume QoQ
- 53% of trading volume is now coming from ‘other’ crypto assets (other than Bitcoin and Ethereum)
- The group reiterated that Q4 is off to a strong start. Resulting in October MTU of 11.7m and trading volume of $186billion
The group mentioned in the earnings call that the group sees their low dollar volume traders reduce trading during times of low crypto volatility. However, also mentioned that this has reversed in October, with an increase in retail trading volumes.
Coinbase provides guidance of Low 8m, which is average with a high of 8.5m MTU. Anticipating that 2021 annual average net transaction revenue per month will be in the high $50.
Coinbase Q3 2021 Crypto Trading Volume
Coinbase has a substantial market share of crypto trading volume and crypto-assets on the platform.
As you can see from the below crypto trading volume was substantially lower for the period of July – Sept with some of the lowest trading volumes recently in July.
Coming into the Q4 it seems that October trading volumes are once again growing MoM, with a good start to the November month.
Coinbase NFT Opportunity
The group also recently announced the launch of Coinbase NFT, a peer to peer marketplace for the exchange of NFT’s.
Opensea which holds around 95% of the market share of the NFT marketplace recorded around $2.72billion of billion of Transaction volume.
Within the first 24 hours of launching their sign up list, Coinbase reported that over 1.3 million users had signed up for their NFT offering. To put this in perspective this is over 4 times the amount of users on OpenSea.
An estimate from BTIG is that Coinbase could add an additional $137.5 million in revenue with their NFT platform after launch. Prophet also assumes that NFT transaction fees could be considerably more profitable than the current trading margin.
Coinbase Q3 2021 Earnings Financials
Coinbase Q3 2021 Income Statement
As mentioned in the below Income Statement Coinbase reported $1.23billion in revenue for the period. This is a substantial increase over the same period in the prior year of over 333%. Over the 9 months ended Sept 2021, is even higher growth at over 600% increase in revenues.
EPS for the quarter was positive with an EPS of $1.92 per share. This now brings the EPS for the nine months up to $13.58 per stock. This is approximately 3% of the stock price in earnings.
Coinbase Q3 2021 Balance Sheet
Interestingly Coinbase has invested over $500million of cash and equivalents into crypto and as per the earnings call are also planning to invest 10% of quarterly net income into crypto investments. The company seem to be dollar-cost-averaging into their investments.
Crypto assets are held on their balance sheet on cost, with over $548m of crypto assets on the balance sheet.
The group have over $18billion of assets vs a total liabilities of $13billion. The group has a total stockholders equity of over $5.36billion. The current price to book value for the company is now around $13 per stock.
Coinbase Q3 2021 Earnings Report – Prophets Take
The COIN Q3 2021 earnings report whilst being sold down by investors pre-market on the 10th November, we believe the result was quite strong, given the broader market dynamics.
The group are also very evidently starting to generate additional sources of revenue from existing customers through their subscription and services segment. For example, it seems that users are starting to trust ‘yield generation’ on the platform as an alternative for a traditional savings account and Coinbase Card. Staking should also help Coinbase to generate revenues from users even on stored assets and potentially increase long term user retention.
We still believe that Coinbase stock is massively undervalued compared to traditional peers such as PayPal and Square which trade on significantly higher price to earnings and price-book ratio’s. For Instance, Square is around a 117b market cap and Paypal is 324b. COIN is potentially the payment gateway of the future and is valued over 4 x lower than Paypal.
We look forward to an extremely interesting Q4, with the group already mentioning that October trading volumes are increasing substantially. One large takeaway for us was that Crypto.com mentioned that there are now around a 200million crypto users worldwide, of which Coinbase has around 70 million verified users on the platform.
The group are also focussing on marketing heavily moving forwards into the coming quarters with a large partnership with the NBA.