The fourth quarter of 2024 has proven to be a significant period for the cryptocurrency market, and analysts are optimistic about Coinbase (COIN), the leading U.S. cryptocurrency exchange. Expectations are high for a substantial increase in earnings compared to the previous quarter, driven by a resurgence in trading activity.
Revenue Growth Projections
According to FactSet, Coinbase’s revenue for the fourth quarter is projected to reach $1.8 billion, a notable increase from $1.26 billion in the third quarter. This upward trend is expected to reflect a significant improvement in the company’s earnings-per-share (EPS), estimated to rise to $1.99 from just $0.41 in the previous quarter.
In addition to revenue, exchange volume is anticipated to show remarkable growth. Analysts predict that the total trading volume will climb to $195.9 billion in the last quarter of the year, up from $185.3 billion in the third quarter. This figure would mark the highest quarterly volume since the fourth quarter of 2021, highlighting a robust recovery in the crypto market.
Analyst Sentiment and Stock Predictions
Citi analysts remain optimistic about Coinbase’s future, stating, “We maintain our bullish thesis on COIN, seeing the company well positioned to benefit as crypto begins a potential transition into a new era.” The bank has assigned a buy rating to the stock and recently raised its price target from $275 to $350. Despite this optimism, Citi anticipates that Coinbase will report slightly lower revenue of $1.7 billion, falling short of the consensus estimate.
JPMorgan’s Ken Worthington described the recent election as a “monumental catalyst for the crypto ecosystem,” although he maintains a neutral stance on Coinbase’s shares. He projects fourth-quarter revenue to reach $1.77 billion, also below the $1.8 billion estimate.
Looking Ahead to 2025
As we move into 2025, the outlook for Coinbase and the broader cryptocurrency market becomes more uncertain. Some Wall Street analysts caution that while the final months of 2024 brought several catalysts for the crypto industry, the effects of policy changes may take time to manifest.
Citi analysts suggest that for 2025, they will assume stable crypto prices and predict a more normalized trading volume, resulting in a 6% year-over-year growth in transaction revenue, compared to the consensus estimate of 3%. They emphasize that Coinbase will likely remain a “risk-on” stock throughout the year, subject to market fluctuations and macroeconomic developments.
Diversification of Revenue Streams
One of Coinbase’s strategic goals over the past year has been to diversify its revenue sources, as approximately 50% of its income still derives from trading fees. However, retail trading activity has not rebounded to the levels seen in 2021, according to research from Kaiko. The share of trading volume from retail clients has decreased significantly, falling from 40% in 2021 to just 18%, which continues to impact transaction revenue.
To address this challenge, Citi analysts believe that Coinbase could enhance its business model in 2025 by focusing on tokenization of assets, developing embedded smart contract applications, and exploring Web3 opportunities. They also see potential in leveraging blockchain technology for cross-border payments and AI governance.
Unlocking Growth Potential
The analysts conclude that the next phase of Coinbase’s growth trajectory will hinge on enhancing utility within the platform. They note that while there are many proofs-of-concept in this area, a clearer regulatory framework could be essential for unlocking further potential. As Coinbase navigates these challenges, its ability to innovate and adapt will be crucial in maintaining its competitive edge in the evolving digital asset landscape.
