Summary For Q4 2024 earnings, Coinbase is expected to beat Wall Street revenue estimates by 26% and EPS estimates by 407%. Our projections suggest a revenue of $2.0 billion and EPS of $5.73. Consumer volumes surged in Q4 2024, while institutional adoption and diversified revenue streams supported stability. FASB accounting changes will boost profits by an additional ~$600M. Coinbase’s anticipated March inclusion in the S&P 500 will trigger significant buying from ETFs and mutual funds, driving at least $2.5 billion in demand, further boosting its stock price. Editor's note: Seeking Alpha is proud to welcome Omer Cheema as a new contributing analyst. You can become one too! Share your best investment idea by submitting your article for review to our editors. Get published, earn money, and unlock exclusive SA Premium access. Click here to find out more » Coinbase (COIN) will announce its Q4 2024 earnings results on February 13th, after the market close. While Wall Street consensus points to $1.59 billion in revenue and $1.13 in EPS, I expect that the company will deliver significantly stronger results. I project a revenue of roughly $2.0 billion (a 66% increase from the last quarter) and an EPS of $5.73. Wall Street is clearly not pricing this upside, resulting in an excellent opportunity for investors to buy the stock before the earnings. The table below provides a summary of my financial model. Coinbase Financial Model (Own model based on publicly available sources) Here are the key reasons that back my claim of this investment opportunity. Growth in Consumer Trading Volumes After the US elections, consumer trading volumes on Coinbase surged. Trump is known as America's first crypto president, and it is widely believed that the crypto industry will be streamlined under his presidency. This optimism has resulted in the consumer trading volumes in November and December surging. The consumer trading volume in November and December were about 250% above the months of September and October. Here’s a breakdown of monthly trading volumes on Coinbase based on the information compiled from TokenInsight. Analysis based on TokenInsight Data It should also be noted from the above chart that the January volumes are also comparable to November and December, which points to a healthy start of Q1’2025 for Coinbase. Historically, consumer trading volume on Coinbase are 18-20% of overall volume. Assuming an average of 19% consumer trading volume, the overall consumer trading volume of Q4 2024 is estimated to be $77.8B (128% QoQ growth). In order to quantify the impact of increased consumer trading volume on revenue, I referred to Alesia Haas, Coinbase’s CFO, who mentioned during an investor conference on the December 10th, noting that transaction revenue in October was about $190 million. Extrapolating the ratio of volume to revenue on the full quarter results in an estimated consumer transaction revenue of $1.1 billion in Q4 2024. Another way for back of the envelope testing of my estimate is comparing the ratio of consumer volumes with overall trading volume. Prediction markets, such as Kalshi, are projecting $440 billion in total trading volume (70% probability) for Coinbase in Q4 2024. Taking 19% as the historical consumer to overall trading ratio, and applying this ratio to the $440 billion projection implies consumer trading volumes of $83.6 billion for the quarter. This results in an even higher revenue estimate than the monthly data showed in the above chart, and supports the case that Q4 revenues are indeed significantly higher than what market analysts are modeling for. Institutional Adoption and Diversified Revenue Streams Retail trading is indeed the largest revenue driver for Coinbase. That being said, institutional trading volumes are also strong for the 4th quarter. It is already a well-known fact that Coinbase’s role as a custodian for spot Bitcoin ETFs has further solidified its position as a trusted partner for institutions. Additionally, the company’s diversified revenue streams—including staking, custodial services, and blockchain rewards—have continued to grow, providing a more stable and resilient income base. Based on increased volumes and increased crypto prices, I expect an 11% QoQ increase in subscription revenues, resulting in $702M total revenue. FASB Accounting Rules: Approx. $600 Million Profit Boost FASB accounting rules have become mandatory starting 2025. These rules require companies to report the fair value of crypto assets on a quarterly basis. Coinbase has been doing that already for the last few quarters. In Q4, however, the price of crypto, especially bitcoin, increased significantly. Based on my estimates, this will result in a $585M profit boost for Coinbase. This gain will contribute roughly 2 dollars to the projected $5.73 dollar figure. S&P 500 Inclusion: Catalyst for further stock price increase The S&P500 is rebalanced quarterly, typically on the 3rd Friday of March, June, September, and December. Given its market cap and several quarters of profitability, I expect Coinbase to enter S&P500 this March, which would trigger significant buying activity. The SPDR S&P 500 ETF (SPY), iShares Core S&P 500 ETF (IVV), and Vanguard S&P 500 ETF (VOO) collectively manage approximately $1.8 trillion in assets. With the Coinbase market cap of $70B as of 29th of January and S&P market cap of $52 trillion, roughly 0.15% of Coinbase weight in the above-mentioned ETFs points to a $2.5B of demand of Coinbase shares for these ETFs. On top of that, S&P 500 index mutual funds, managed by companies like Vanguard, BlackRock, and Fidelity hold a significant portion of the tracking funds managing assets in excess of $5 trillion. This represents a $7B+ additional demand for Coinbase, which will result in an additional price increase in March. Conclusion: A strong buy before earnings Coinbase’s Q4 2024 earnings report has the potential to be a positive surprise for the Coinbase stock. With revenue exceeding $2.0 billion and EPS reaching $5.73, the results will be way above market expectations. The combination of increased consumer trading, further institutional adoption, and the impact of FASB accounting rules positions Coinbase for a blockbuster quarter. Investors should consider taking a position ahead of the earnings announcement, as the market is not fully pricing in the company’s upside potential. As the crypto market continues to mature and Coinbase solidifies its leadership position, the stock remains a compelling investment opportunity. Don’t be surprised if February 13th marks the beginning of a new upward trajectory for Coinbase’s stock.
