Goldman Sachs, Compass Point Reveal High Q2 Expectations for Coinbase

Goldman Sachs and Compass Point are expecting Coinbase (ticker COIN) to exceed analyst expectations for second-quarter earnings, according to two reports released by the respective financial institutions. 

In a note to clients, Goldman Sachs analysts estimated that the cryptocurrency exchange’s earnings per share will come in 11% higher than expected. Compass Point researchers similarly increased their earnings per share projections from $2.57 to $2.90. 

The Goldman Sachs note cited increased crypto volatility as a reason for higher trading volume and revenue, namely through trading fees, which have historically accounted for the majority of Coinbase’s revenue. 

Compass Point researchers pointed out that Coinbase’s trading volumes experienced a surge in the beginning of the second quarter, but momentum has been slowing ever since. The firm is therefore lowering its 2021/2022 earnings per share estimates to $6.97/$3.20 from $9.28/$4.25, according to the report. 

Compass Point estimates that COIN market share fell from 6.5% during the first quarter to 5.4% in the second quarter. The firm sees subscription and service revenue increasing in the coming months. 

The news comes shortly after Coinbase joined many crypto asset management companies and exchanges in offering high-yield accounts. Coinbase customers can now earn 4% annually by lending out their USD Coin (USDC). 

Coinbase’s account is not FDIC or SIPC-insured and offers less interest than many similar, competing accounts, such as Celsius and Nexo, which offer 13% and 12%, respectively. 

The exchange also recently launched its bitcoin lending program, where clients can use their crypto holdings as collateral for loans. Qualifying users can receive up to $20,000 in credit with an interest rate of 8% for bitcoin-backed loans for contracts that are 12 months or less.

The new products come after Coinbase executives signaled that transaction fees and trading volume will not be significant enough to support the exchange in the future. 

“We seek to operate the company at roughly break-even in terms of profitability, smoothed out over time, for the time being,” Coinbase said in its first-quarter financial results.

Coinbase is scheduled to release its second-quarter earnings on August 12.