3Q23 revenue beat, yet trading volume fall short
- Revenue and net losses were ahead of expectations thanks to higher take rate and interest income, but trading volume were below expectations
- We think the historical low volatility since 2016 may suggest a structural decline of interest towards crypto
- We are cautious towards the sustainability of the share price rebound driven by lower interest rate expectations; maintain HOLD with TP of US$80
Revenue beat, volume fell short. 3Q23 revenue +14% y-o-y / -4.8% q-o-q to US$674m, 3% higher than consensus’ expectation, mainly due to higher-than-expected take rate and interest income (incl. those derived from stablecoin). Trading volume fell 17% q-o-q to US$76b, 5.5% lower than consensus forecast, but is still better than global spot market’s 24% q-o-q decline. Total subscription revenue stayed flattish q-o-q with interest income (incl. stablecoin revenue) rose 5.2% q-o-q. Total operating expenses was down 4% q-o-q as the company continued to focus on efficiency and shifted some sales & marketing and legal-related expenses from Q3 to Q4. Net losses as a result narrowed to US$2m, compared to US$97m of losses in 2Q23.
Fundamentals remained relatively weak. Despite the revenue beat, the weaker-than-expected trading volume suggests that the fundamentals have yet to recover. Although the Oct 2023 transaction revenue of c.US$105m beat the run rate in 3Q23, which was supported by the spikes after Bitcoin hitting US$35k, the volume did not sustain subsequently. The crypto volatility has fallen to lowest level since 2016, and may suggest a structural decline in retail interest in crypto, considering the substantially higher cash return lately and the increased concerns post-FTX event. Coinbase‘s share price has surged by 14% since late-Oct along with broader market on lower interest rate expectations, which may not be sustainable given its relatively weak fundamentals. Maintain HOLD with TP of US$80.