Summary Coinbase delivered respectable YoY revenue growth despite Q1 headwinds, with strong performance in subscription and services revenues, especially from stablecoin. QoQ transaction revenue declines appear temporary, as the rebound in crypto prices should drive stronger results in upcoming quarters. Valuation remains attractive, with the P/S ratio well below early 2024 highs, presenting a favorable entry point for investors. Technical indicators suggest current weakness is likely consolidation, with long-term momentum and fundamentals supporting a bullish outlook. Seeking Alpha With the price of Bitcoin ( BTC-USD ) more than recovering from its February to April decline, Coinbase Global, Inc. (COIN) has also rallied significantly off its early April lows. Early April was when my previous article on this company was written, and the stock has seen gains of nearly 70% since that buy rating. That outpaced the S&P500's around 20% gain during this period. In this article, I'm here to determine whether the stock likely has room to run or whether now would be a good opportunity to take some profits. YoY Growth Is Acceptable Coinbase Q1 Shareholder Letter Let's begin with a discussion of their 2025 Q1 revenues. Coinbase reported total revenues of $2.0343 billion, representing growth of 24.2% YoY. Still, this underperformed expectations by some margin as they missed by $43.95 million. After subtracting $74 million of corporate interest and other income, net revenues were $1.9603 billion, up 23.5% YoY. This shows the core business grew slightly slower than what the total revenue figure had indicated. In QoQ terms, total revenues did contract by 10.4%, however. Headwinds Pressure Transactions Coinbase Q1 Shareholder Letter Total transaction revenues saw significant QoQ declines of 19% as they cited a poor backdrop. They attributed this weakness to a wipe-out of 19% in total crypto market cap from the end of Q4 to the end of Q1. As you can see above, transaction revenues were still able to see healthy YoY gains of 17.2%, however, and so the company still performed respectably amid the crypto rout. Consumer transaction revenues saw major QoQ declines, as they dropped 19% to $1.1 billion. In terms of trading volume, you can see that there were notable QoQ declines for both Consumer and Institutional clients. Consumer volume dropped by 17.0% while Institutional volume dropped by 8.7%. Still, both categories saw significant YoY increases, and so I would say the long-term direction of the business remains strong. Stablecoin Leads The Way Coinbase Q1 Shareholder Letter Coinbase Q1 Shareholder Letter Subscription and services revenue saw better performance overall, as there were both QoQ and YoY gains. They reported revenues of $698 million, up 9% QoQ and 36.6% YoY. Within this segment, Stablecoin revenues saw a particularly strong Q1, as QoQ growth of 32% to $298 million was reported. YoY gains exceed 50%. They attribute this to "average USDC held in Coinbase products increased 49% Q/Q to $12.3 billion, driven by longstanding efforts to better integrate USDC across our product experience and our rewards program." Therefore, I believe these results show that their strategy is paying off handsomely. As shown above, off-platform USDC hit $42 billion, as they saw growth of 39% QoQ as they cited "growth in USDC usage across onchain dapps, and expanded distribution partnerships." Blockchain rewards revenue and interest and finance fee income saw modest QoQ declines of 9% and 4%, respectively, while other subscription and services revenue increased 5% QoQ. Their stablecoin business was clearly the highlight here in my view. Revenues Are Resilient Data by YCharts After that Q1 discussion, I believe a zoom out view of where things are at would be of value to readers. Revenues are overall in quite a strong position despite QoQ declines as they are at the second-highest level in the past three years. As for YoY revenue growth, the slowdown from Q4 was considerable but still, revenue growth is at around the average of the past few years. In addition, I believe that this deceleration in growth could just be temporary, as the rebound in Bitcoin and other crypto prices should boost its transactions business in the next few quarters. Guidance Is Mixed Coinbase Q1 Shareholder Letter They don't provide guidance for their transaction revenue, but they did say that generated $240 million in April. Spot transaction volumes were down 12% MoM, basically in-line with the global spot volume declines of 13%. For May and June, I expect considerably stronger transaction results due to the major rebound in crypto prices. They are projecting transaction expenses to be in the mid-teens percentage range of net revenues, which would in-line with Q1's 15%. For subscription and services revenue, they are expecting between $600 million and $680 million. At the midpoint, this would represent QoQ declines of 8.3% but YoY gains of 6.8%. Obviously, QoQ declines shows expected weakness in this segment after strong Q1 results. YoY growth slowing from around 37% to the mid single digits shows that the longer-term trajectory of this segment may slow. Technology & Development + General & Admin expenses are expected to drop slightly QoQ at the midpoint, as they reported $749.7 million in Q1. As for Sales and Marketing expenses, the midpoint of guidance at $265 million is a moderate increase from $247.3 million in their Q1. As a whole, the guidance that they provided for subscriptions and services was a bit weaker than desired, but I believe a rebound in transactions could potentially more than offset those QoQ declines. Valuation Remains Attractive Data by YCharts The P/S ratio has rebounded from lows of around 6.0 earlier this year but in the grand scheme of things, the multiple is not at an elevated position when compared to the peak in early 2024. I believe this current valuation provides opportunity for investors. Q1 results were overall a bit weaker than expected, but that was mainly a result of crypto weakness and not problems with the company itself. QoQ transaction revenue declines are temporary in my view, and these headwinds already seem to have dissipated as Bitcoin has more than recovered from its stretch of weakness. In their guidance, it was shown that subscription and services revenue growth could slow YoY in their Q2, but the likely bounce back in transactions should highly offset those effects on company-wide net revenues. Overall, Coinbase seems well positioned, despite headwinds unfavourably affecting their Q1 results. Therefore, the significant contraction in the P/S ratio from a far above 20 reading in early 2024 to a current level of 9.868 shows that the stock is still at a relatively attractive entry price. Currently, there are no directly comparable companies to Coinbase that are publicly traded, and so I will leave this valuation discussion at that. Stock Is Likely Consolidating Yahoo Finance Let's conclude today's discussion with a brief look at Coinbase's technicals. Firstly, a death cross occurred between the 50-day SMA and 200 day SMA back in early April, but the deviation between the lines has been closing since early May. Therefore, downward momentum has been receding. In fact, a golden cross seems achievable in the near future. The stock did rally back above the 200-day SMA back in early May as a key sign of long-term strength as well. For the near term, the stock did drop a hair below the Bollinger Bands midline on the most recent trading day, and so there may be some weakness. In addition, the MACD line is currently below the signal line after a bearish crossover in late May. This period of weakness may be just consolidation, however, as the RSI has remained above 50 for the most part. Currently, the RSI has a reading of 54.68 and so the bulls seem to be holding on to control of the stock by a modest margin. My Take The stock has had an incredible run since my buy rating in early April. I believe maintaining the buy rating at this point would be appropriate. Q1 earnings show the effects of crypto headwinds that were uncontrollable for Coinbase. The company's stablecoin business came through as subscription and services revenue managed both YoY and QoQ gains. Total revenue growth did slow considerably YoY, and guidance was a bit weaker than desired for their subscription and services segment. However, as discussed earlier, I expect the rebound in crypto prices to boost transaction revenues in the coming quarter. This should help to strongly offset this potential weakness. The valuation remains attractive in my view as the P/S ratio is still far off the 2024 peak despite the recent rebound. Lastly, the technicals likely show a consolidation phase and so further gains are possible from here especially with the SMAs showing long-term strength improving. As a result of this analysis, Coinbase remains a buy in my view.
