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Coinbase had an eventful Thursday — revealing its intent to buy crypto options giant Deribit before detailing its Q1 earnings after the market closed.
As the dust settled, analysts gave a mixed bag of outlooks for the company.
The crypto exchange’s total first quarter revenue was $2 billion — down 10% from the prior quarter. While trading revenue was down 19% quarter over quarter (nearly $1.3 billion), subscription and services revenue rose 9% over that span (to ~$700 million).
That subscription and services figure includes stablecoin revenue derived from its arrangement with Circle (Coinbase earns reserve income on the USDC it holds).
USDC’s market cap reached a high around $60 billion in Q1, and average USDC held in Coinbase products grew 49% QoQ to $12.3 billion.
Speaking of stablecoins, the Senate’s cloture vote yesterday on the GENIUS Act failed, 48-49. Coinbase CEO Brian Armstrong said he wasn’t discouraged.
“It’s all part of the negotiation,” he noted on yesterday’s earnings call. “We think there’ll be another vote next week on stablecoins so we’re very excited about that progress.”
Deribit deal, more M&A?
Analysts of course asked about the pending $2.9 billion deal to acquire Deribit revealed earlier in the day.
Benchmark analyst Mark Palmer said yesterday that the purchase would give Coinbase “an immediate and dominant foothold in the high-growth derivatives space” as more institutions adopt crypto. Architect Partners’ Michael Klena told me he expects competitors to respond via their own acquisitions.
In terms of financial impact, Coinbase CFO Alesia Haas said: “Deribit has a history of positive adjusted EBITDA, and we believe it will be adjusted EBITDA positive on an accretion basis.”
Oppenheimer & Co. analyst Owen Lau said he believes this deal will make COIN a “legitimate challenger” to Binance, Bybit and OKX when it comes to derivatives.
“Importantly, crypto options are less cyclical, with steady demand during both up and down markets,” Lau explained.
But Compass Point analysts Ed Engel and Joe Flynn pointed out Deribit’s focus on institutional customers. That doesn’t help Coinbase grow its retail-driven perpetuals trading volumes, which they called “a necessary precursor to growing market share.”
When asked about whether the crypto exchange would remain active on the M&A front, Coinbase president Emilie Choi noted the cash on its balance sheet ($8.5 billion, by Lau’s count) means it can make “bigger bets.”
Choi added: “We also think regulatory clarity is going to enable us to take larger swings with greater confidence, unlocking new products, utility cases and geographies.”
Mixed outlook
Despite general optimism around the Coinbase-Deribit deal, Morningstar analyst Michael Miller told me he doesn’t think the acquisition drastically changes his overall view of, or outlook for, the exchange (his fair value estimate for COIN is $170).
After all, he said, it’s an extension of existing efforts and doesn’t reduce Coinbase’s crypto market exposure, which contributes volatility to quarterly results.
Though Coinbase has had “considerable success” in growing stablecoin revenue, Miller noted, execs expect that to be more than offset in Q2 by a decline in blockchain rewards revenue. The company projects its Q2 subscription and services revenue to fall to somewhere between $600 million and $680 million.
Coinbase’s $240 million of total transaction revenue in April puts it on pace to end Q2 at $720 million. That would be down 34% from Q1.
Engel and Flynn downgraded COIN to a sell rating last week — reiterating in a note yesterday that COIN’s addressable market for retail trading is already deeply penetrated in the US.
“We believe institutional segments represent a larger growth opportunity; however, these are both lower margin and more competitive businesses than COIN’s legacy retail footprint,” they explained.
The Compass Point analysts’ stock price target for COIN is $180. The company’s shares were trading for ~$202 at 2 p.m. ET — down 2% on the day.
Lau is more bullish, giving COIN a 12- to 18-month price target of $269. He lowered that from $279, though, noting tariff-fueled macro uncertainty’s effect on volumes.
We’ll see how legislative updates and trade war developments impact COIN going forward.
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