• Coinbase released its second-quarter financial results, revealing a decline in transaction revenue.
• Analyst Mark Palmer predicts a downside for Coinbase stock.
• Coinbase stock has experienced significant growth since the beginning of 2023.

Shares of Coinbase Global Inc remained relatively flat in after-hours trading, despite the crypto exchange reporting strong results for the second quarter.

Why is Coinbase stock not responding positively?

The stock is primarily influenced by the decline in transaction revenue, which amounted to $327 million, a decrease of nearly 13% compared to the previous quarter. Trading volume also decreased from $145 million to $92 million.

Another negative factor was the decrease in interest income, which dropped by about 17% from the previous quarter to $201 million. Berenberg analyst Mark Palmer commented on the earnings in an email, stating:

Interest income and staking revenue may face challenges in the future due to the decline in USDC’s market cap and regulatory issues related to staking programs.

In Q2, Coinbase earned $151 million in interest income from USDC holdings.

Key figures from Coinbase’s Q2 earnings report

• Reported a loss of $79 million, compared to $430 million in the same period last year
• Per-share loss reduced from $1.98 to 34 cents
• Revenue dropped approximately 35% YoY to $773 million
• Consensus estimate was a loss of 76 cents per share on $628 million in sales
• Subscription and services revenue amounted to $335 million

In June, Coinbase Global Inc was sued by the SEC for allegedly violating U.S. securities laws (read more).

Is it a good time to buy Coinbase stock?

Coinbase also announced in a letter to shareholders that transaction revenue in July stood at $110 million.

The crypto exchange expects to generate at least $300 million in subscription and services revenue in the current financial quarter. According to Berenberg’s Palmer:

The guidance was conservative, and the adjusted EBITDA included a substantial adjustment for stock-based compensation, an area where management has expressed intentions to reduce expenses.

It is worth noting that Palmer has set a $39 price target for Coinbase stock, indicating a potential downside of more than 50%. He believes that the crypto company is not investable, at least in the near term.