• Coinbase is expected to report a sharp decrease in its revenue for the fourth quarter of 2022 due to falling crypto prices and user trust.
• Wall Street analysts are predicting a 75% drop in revenue compared to the same quarter in 2021 and a net loss of $568.1 million.
• Analysts have downgraded Coinbase’s stock from Buy to Neutral, citing increasing regulatory pressure and concerns about near-term prospects.
Coinbase Revenue Projected To Drop
Coinbase is set to release its financial results for the fourth quarter of 2022 following the market close on Tuesday with analysts expecting a large drop in revenue due to record low crypto prices and waning user trust in centralized exchanges. The exchange is estimated to post a total revenue of $588.6 million, which would be a steep decline of more than 75% compared to the same quarter in 2021 when it reported an income of $840 million. Additionally, Coinbase is predicted to report a net loss of $568.1 million, while it posted a profit of $177 million over 2020.
Contributing Factors To Decline
The sharp fall in Coinbase’s figures can largely be attributed to diminishing crypto prices as well as growing suspicion surrounding centralized exchanges after FTX’s collapse earlier this year. Furthermore, JPMorgan and D.A Davidson have downgraded Coinbase’s stock from Buy to Neutral due regulatory pressure that is “just getting started,” according to Chris Brendler from D.A Davidson. S&P Global also downgraded the company’s debt one position from “BBB” to “BB-“, moving it from “investment grade”to “speculative grade”.
Revenue Sources Impacted By Regulations
Coinbase generates around 40% of its total revenue from subscriptions and services such as custody, stablecoins, and staking – significantly higher than previous quarters where less than 10% was reported back in 2021 Q4 results.. However, as regulations increase, these business lines may suffer as they become subject closer scrutiny by regulators which could impact their bottom line negatively going forward .
Price Rebound
Amidst rising crypto prices at the start of 2023, Coinbase’s stock has seen an 82.55% increase year-to-date despite having lost two thirds of its value over the last year .
Conclusion
Coinbase has been hit hard by declining cryptocurrency prices combined with increased regulatory pressure which has caused analysts from JPMorgan and D..A Davison downgrade their outlook on the company’s stock price performance this year . Despite this , there may still be hope for recovery if cryptocurrencies continue their upward trend throughout 2023 .