Thomas Daniels
This week, Coinbase Global Inc. saw a notable surge in its stock value, rising by 17%, buoyed by a series of optimistic reevaluations of its financial health from multiple analysts.
Reports from Bloomberg highlighted a shift in perspective from JPMorgan analyst Kenneth Worthington, who revised his previous bearish view on Coinbase’s stock following a significant increase in Bitcoin’s price, which soared past $50,000 earlier this week for the first time since 2021. Worthington updated his January downgrade, adjusting his rating to a neutral from a previously less favorable underweight assessment.
His initial downgrade stemmed from concerns that the enthusiasm for Bitcoin ETFs might diminish. However, contrary to his expectations, these funds have shown robust performance in crucial trading metrics. Meanwhile, John Todaro of Needham & Co. has predicted that Coinbase will announce a net income of $103 million for its fourth quarter. This projection notably diverges from the consensus among other analysts surveyed by Bloomberg, who had predicted a loss for the company, estimating around a $16 million deficit, or 5 cents per share.
The profitability of Coinbase generally sees an upturn during bull market phases, driven by increased trading volumes from both retail and institutional investors, which, in turn, boosts fee revenue. The period in question witnessed Bitcoin’s price climbing by nearly 60%, rounding off the year with a staggering 157% appreciation in the value of the cryptocurrency.
This increase preceded the launch of spot Bitcoin ETFs, though the long-term effects of these funds on Coinbase’s operational model remain to be seen, especially given the challenges the company has faced during periods of decreased trading volume across the sector.
Since the onset of the crypto winter in early 2022, triggered by events such as the collapse of Terra Luna and the downfall of Sam Bankman-Fried’s FTX, Coinbase has been navigating through profitability challenges. This period marked the beginning of a tough phase for the leading U.S. exchange, culminating in significant workforce reductions.
