The Ratings Game: Coinbase earnings have Wall Street wondering whether crypto company is too optimistic or misunderstood

by | Aug 13, 2022 | Stock Market

Coinbase Global Inc. executives remain optimistic about the long-run promise of their cryptocurrency platform, but they admitted Tuesday that current challenges in the crypto market are likely to persist. After posting a $1.1 billion loss in the latest quarter amid declining volumes and active-user counts, Coinbase
projected that volumes and monthly transacting users could fall further in the current quarter.

Additionally, executives said they were “cautiously optimistic” about their ability to “operate within the $500 million adjusted Ebitda loss guardrail” that they had targeted earlier in the year. Shares of Coinbase were up 1% in morning trading Wednesday. Despite management being “bullish as ever” on the future of crypto technology, analysts remained largely focused on the near-term challenges in the wake of the latest report. “The key question going into earnings was whether the company will announce further cuts to bloated expense base to limit losses and cash burn,” Bernstein’s Harshita Rawat wrote. “Management, however, noted that they are ‘cautiously optimistic’ about containing losses to previously guided -$500 adj. Ebitda number. We believe this might well prove to be an optimistic scenario” Rawat is concerned about “ballooning” stock-based compensation, as well as the company’s cash-burn trends. She noted that Coinbase saw stock-based compensation creep up to 49% of net revenue in the most recent period, while Coinbase also burned through more than $400 million of cash. “We think the company has suf …

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