Coinbase stock remains in a technical bear market after falling by over 20% from the year-to-date high. Will this change after its earnings on Oct. 30?
Summary
- Coinbase stock price has dropped by 20% from its highest point this year.
- The company will publish its third-quarter results on Thursday.
- Technical analysis points to a bullish breakout in the near term.
Coinbase earnings preview
Coinbase, the biggest cryptocurrency exchange in the United States, has remained under intense pressure after publishing its second-quarter results in July.
These results showed that its revenue came in at $1.5 billion in Q2, down by 26% from the first quarter and a few points above the $1.44 billion it made in the same period last year.
The revenue decline was mostly because of its transaction business, which made $764 million, down from the $780 million it made in Q2’24. This slowdown was partially offset by the performance of its subscription and services revenue.
A closer look at its numbers in the second quarter shows that its fastest-growing business was its stablecoin operations, which made $332 million. This business is made up of its partnership with Circle, the creator of USD Coin (USDC). Coinbase takes all the interest that USDC in its platform generates.
Coinbase had a net income of $1.4 billion. While this was a good number, most of it was because of an unrealized investment in Circle. Excluding this gain and that of its crypto portfolio, its net income would have been just $33 million.
Therefore, the upcoming results will provide more color on its business and whether its transaction business continued growing in the last quarter.
Analysts anticipate strong revenue growth
Data compiled by Yahoo Finance shows that analysts expect the upcoming results to show that its third-quarter revenue rose by 49% to $1.8 billion, with the most optimistic analyst expecting it to cross the $2 billion milestone. This growth will be because of its Deribit acquisition.
The average estimate of its earnings-per-share will be $1.1, up from the 28 cents it made in the same period last year.
These results come as the company is facing major challenges. The main ones is that competition is rising in its core US market, with companies like OKX and Binance returning there. Top companies like Kraken and Robinhood are intensifying their presence. Robinhood’s crypto revenue almost doubled in the second quarter, while Kraken grew by over 14%.
Analysts have a muted outlook for the Coinbase stock, with the average estimate rating being $381, a few points above the current $350.
Coinbase stock technical analysis
The daily timeframe chart shows that the Coinbase stock price formed a down-gap in July after publishing a weak financial report.
It has spent the last three months attempting to fill that gap. Along the way, it has formed a rising broadening wedge pattern, which is commonly known as a megaphone.
Coinbase remains above the 100-day Exponential Moving Average and the 38.2% Fibonacci Retracement level. It is also slightly above the bottom of the trading range of the Murrey Math Lines tool.
Therefore, there is a likelihood that the Coinbase share price will bounce back after earnings, and possibly hit the major S /R pivot point of the Murrey Math Lines.