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Bernstein: Q2 is the ‘Meaningless Quarter’ for Coinbase as Stock Drops 15% After Earnings Report

News RoomBy News RoomAugust 1, 2025No Comments4 Mins Read
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Coinbase Earnings Analysis: Understanding the Stock Dip and Long-Term Growth Prospects

Coinbase, the leading cryptocurrency exchange, saw its shares plunge more than 15% following its recent earnings announcement. Despite this significant drop, Bernstein, a well-regarded research and brokerage firm, is advising investors to avoid panic. They categorize the second quarter as a period of little importance, arguing that its performance should be viewed in the context of recent recovery trends in the broader digital asset market. The analysts point out that substantial market improvement only began in July, rendering Q2 results less critical for long-term evaluations.

In its earnings report, Coinbase disclosed revenue of $1.5 billion, marking a 26% sequential decline. This downturn was primarily attributed to a sharp 39% drop in transaction revenues. Further, subscription and services revenue saw a 6% decrease, while staking rewards fell by 25%. However, on a brighter note, revenue from stablecoin transactions increased by 12%. Analysts from Bernstein also highlighted three specific financial setbacks that impacted the quarter’s performance: $307 million in costs related to data theft, a $1.5 billion unrealized loss on its investment in Circle, and $362 million in unrealized gains from crypto assets.

Interestingly, despite these challenges, Bernstein analysts observed a resurgence in trading activity, particularly in July, where transaction revenue peaked at $360 million—a 44% rise compared to the second quarter’s monthly average. Bernstein’s lead analyst, Gautam Chhugani, emphasized that the surge in trading was not surprising, as the digital asset market was beginning to recover and diversify. The market’s focus had notably shifted towards prominent cryptocurrencies like Ethereum (ETH), which saw a 50% increase in July. Thus, they conclude that while transaction revenues have declined, the environment is primed for recovery moving forward.

Looking ahead, analysts are predicting increased market volatility along with a growing interest in a wider array of blockchain assets. Influenced by structural changes—especially around stablecoins and asset tokenization—this renewed interest is expected to drive activity through the latter half of the year. To contextualize valuation, Bernstein has applied a 25x multiple on projected 2027 earnings, signaling a strong long-term growth potential for Coinbase as the crypto financial infrastructure continues to evolve. They reaffirmed their "outperform" rating, establishing a price target of $510, indicating a 35% upside from its last closing price of $377.76.

Several key catalysts are poised to stimulate Coinbase’s growth in the coming months. Analysts point to expanding token listings from decentralized exchanges, a deeper integration of stablecoins on their platform, and efforts to enhance crypto derivatives trading. Additionally, Coinbase aims to offer tokenized stocks and prediction markets in the U.S. as part of its "everything exchange" vision. This strategic positioning is critical for their long-term sustainability in an increasingly competitive landscape.

Moreover, strategic partnerships with major financial institutions like JPMorgan and PNC, as well as fintech companies such as Webull, eToro, and Revolut, are positioning Coinbase as a leading provider of crypto financial infrastructure. By aspiring to be the "AWS of crypto," Coinbase is laying the groundwork for its role as a backend service provider rather than merely a consumer-focused exchange. In a significant development, Coinbase also revealed it had acquired 2,509 BTC during the quarter, placing it back in the top tier of public companies with substantial Bitcoin holdings, just behind Tesla.

In summary, while Coinbase’s recent earnings report led to a notable stock decline, the broader implications suggest that panic selling might be unwarranted. Analysts at Bernstein advocate for a long-term perspective, highlighting notable recovery trends in the cryptocurrency market as well as key growth drivers for Coinbase. As the digital asset landscape changes and matures, Coinbase’s strategic initiatives and partnerships aim to solidify its position as a key player in the evolving financial infrastructure of crypto. Investors might do well to stay the course, keeping an eye on the strategic moves and market dynamics that could redefine Coinbase’s trajectory in the months ahead.

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