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Coinbase’s share price: what to expect from Q2 results

When is Coinbase’s results date?

Tuesday, August 9, after the market close, is when we get the 2022 second quarter results for Coinbase.

Coinbase share price: forecasts from Q2 results

All eyes are on whether it’ll negatively surprise once more after its previous results for the first quarter of this year. When expectations were of positive reading, Coinbase had a loss of $1.98 per share. Revenue was also a miss at $1.17bn instead of roughly $1.5bn expectations.

Total trading volume dropped massively, and it suffered a drop in retail monthly transaction users yet it remained optimistic and 'focused on the long-term' with hopes Coinbase will emerge as a key and trusted player regardless of the path.

Costs will remain an item of focus, even after Coinbase announced layoffs while altering prior plans for increased headcount and signifying a phase of slower growth if not contraction as the sphere remains in a ‘crypto winter’. Crypto prices are trading at lower levels since mid-May, though little changed for Coinbase’s share price after the plummet following its 2022 first-quarter earnings release.

Such is the nature of its share price that can experience significant moves based on not just where the overall cryptocurrency market has moved, but on how immune they are to what have been successive stories of failures for financial institutions within the crypto sphere and concerns over liquidity, withdrawals, and so on.

A sigh of relief then for investors following its clarification in July regarding its lack of exposure to insolvencies among clients and counterparties, that its financing book hasn’t recorded any losses, and it isn’t falling into the trap of lending out customer funds.

It might not mean as much for the retail sector which accounts for a clear portion of its revenue, but is a crucial one for institutions looking for trustworthy and reliable counterparties and who lead on volume.

Thereafter came the big positive: the announcement it was partnering with the world’s largest asset manager, BlackRock, and would provide its institutional trading platform to its institutional clients. That helped offset a couple of negatives prior, with reports of an SEC investigation and being dropped from the ARK fund.

While investors will be noting its plans in light of the tested crypto atmosphere, given that it is trading amongst the crypto majors (Bitcoin by a margin and then Ethereum) that drives its revenue. Investors are worried over how it’ll fare up against rising competition from crypto exchanges attempting to move up the volume rankings, with news in June that Binance.US was cutting fees for plenty of Bitcoin trades to zero, and worries that it’ll eventually carry over into other exchanges over time if it causes an exodus of traders.

In all, monthly transacting users might find it more difficult to transact when prices are in retreat as profits usually drive more trading, and losses mean they’re in a wait-and-see mode.

Lower crypto prices combined with expectations of lower participation and trading sizes can only translate into lower fees that the crypto exchange can take in (and taker/maker fees as a percentage), and given it makes the bulk of its revenues means it’s expected to be much lower this time around at around $830m.

As for earnings, expectations are for another loss, and for it to widen to -$2.68 per share, an estimate that’s suffered lower revisions over the past few months. Longer-term estimates are usually more difficult as it requires a more stable underlying crypto market.

As for analyst ratings, it remains majority buy amongst them, the notable downgrade from Goldman Sachs shifting from neutral to sell in late June. The average target price is still very much above its current share price.

Trading Coinbase’s Q2 results: technical overview and trading strategies

A glance at the chart above (and that of nearly anything crypto-related on the weekly time frame really) and it doesn’t take much to realize that even after oscillations over a couple of months or so and the lift off the lows, it’s still a long-term bearish picture, with the BlackRock news taking prices past the upper end of its long-term bear trend channel.

When it comes to its DMI (Directional Movement Index), its DI- is still above its DI+ but on the verge of showing a positive cross, and its ADX (Average Directional Movement Index) whose reading is still in trending territory but past its peak figure around mid-July. Positives include its RSI (Relative Strength Index) moving far from oversold territory, and prices moving closer to the middle of the longer-term Bollinger Band and away from the lower extremes.

Since the weekly time frame incorporates historic bearish moves that we saw in March through mid-May, the technical narrative gets positive when zooming into shorter-term time frames like the daily, with prices walking the upper band of the now-widening Bollinger Bands. In that time frame where they ‘acclimatized’ to more rangebound sessions since the last earnings release, an RSI is now in oversold territory, and a large positive DMI here as opposed to negative on the longer-term weekly time frame.

Classifying the technical overview depends on which time frame you’re looking at, with the daily more ‘bull average’ (volatile on any underlying updates that include earnings, but moving towards a higher average absent), while on the weekly thus far averaging lower, provided its bear trend channel can hold.

That makes it more volatile (an ADX reading in trending territory usually gives more weight to a trend, but at a key inflection point means prices don’t show signs of settling). As always it needs pointing out that we’re looking at technicals ahead of a major fundamental event that can easily cause prices to experience more volatility even in the ‘safest’ of more established companies.

There’s also the matter of levels, with an RSP (Relative Starting Point in the table below) to 1st level difference that’s 15% of the value of the RSP. A common theme amongst prices of cryptocurrencies and crypto-related shares where higher historic pricing means emulating average weekly moves that now constitute a larger percentage of current lower prices becomes a more difficult task. A $15 move when it was $300 translates into a 5% price change, but the same $15 price change on a lower $70 is over 21%.

IG Client sentiment* and short interest for Coinbase shares

Retail trader bias remains in extreme buy territory, dropping from 88% two weeks ago to 84% as of this morning. As for short interest, it’s at over 22% with 33m shares shorted of roughly 148m floating. In comparison, the companies where we’ve done earnings previews usually have sub-1% short interest readings.

*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am for the outer circle. Inner circle is from two weeks prior.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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