Coinbase revenue estimates raised ahead of Q2, but volumes slump: BofA

Bank of America raised Coinbase's Q2 revenue estimates to $1.44 billion, citing higher stablecoin USDC interest income ($335M), though this remains below consensus. The bank concurrently forecasts a 40% QoQ slump in retail trading volumes and transaction revenue to $762 million, indicating continued weakness in Coinbase's core trading business. While maintaining a 'Hold' rating and raising its price target to $405, BofA noted improving crypto trading activity in July, potentially setting the stage for stronger Q3 results despite the Q2 volume pressures.

Analysis

Bank of America has raised its price target on Coinbase (COIN) to $405 from $260 while maintaining a "Hold" rating, reflecting a nuanced outlook ahead of Q2 results. The bank increased its Q2 total net revenue estimate to $1.44 billion, primarily due to higher-than-expected interest income from the USDC stablecoin, now projected at $335 million. However, this revised forecast remains approximately 6% below the consensus estimate of $1.54 billion. The core trading business shows significant signs of weakness, with BofA forecasting a 40% quarter-over-quarter decline in retail trading volumes and a corresponding 40% drop in transaction revenue to $762 million. Institutional revenue is expected to fall even more sharply by 48% to $51 million. This pressure is compounded by modest USDC market cap growth of only 5% between May and June, suggesting limited near-term upside from stablecoin activity despite recent hype. Looking forward, the analysis points to a potential recovery in the third quarter, evidenced by a strong rebound in crypto trading activity in July, with average daily volumes for bitcoin, ether, and XRP up 30%, 60%, and over 100% month-over-month, respectively.

Key Decisions for Investors

• Investors should anticipate potential Q2 earnings volatility, as Bank of America's forecast for a 40% sequential drop in core transaction revenue and a total revenue estimate of $1.44 billion both signal a likely miss against consensus.
• Pay close attention to the composition of revenue in the upcoming report, as the growing contribution from subscription and services, particularly the $335 million in projected USDC interest income, is becoming a critical buffer against trading volume volatility.
• Consider any post-earnings price weakness as a potential opportunity, but only if management confirms the positive July trading volume trends which suggest a strong recovery is materializing for the third quarter.