Summary Coinbase reported a Q1 2025 EPS miss of -87%. The stock did not move much. Referencing my previous Coinbase coverage, I explain why I expected this miss and how I can see Coinbase achieving much higher than expected EPS later this year. Key drivers are; an ongoing Bitcoin bull market, strong service revenue growth, and a slight re-rating of their valuation. Coinbase is a Buy. Introduction Shares of cryptocurrency trading & service provider Coinbase Global Inc. (COIN) dropped by 44% from the beginning of 2025 to their interim low on April 7. Since my first Coinbase coverage on April 10, the stock is up 16%. I am now revisiting COIN because they released their Q1 2025 earnings. The development of some key figures were essential to my previous investment thesis. I recommend reading my first article on Coinbase before this one, to thoroughly understand where I'm coming from. To briefly summarize my points made, though, I outlined that analysts' EPS estimates are going to be way off in 2025. I noted the following: Specifically, I believe Q1 will yield much lower EPS than anticipated due to significant losses in COIN's cryptocurrency holdings and lower transaction volume, both due to a sharp decline in the crypto market. Conversely, EPS will be much higher than anticipated in Q2 and Q4, possibly even in Q3. This leads me to the conclusion that Coinbase was a Strong Buy. The proposed upside potential stems from achieving higher than expected earnings in these two quarters. Additionally, I believe that due to the current recovery in digital asset prices, a rebound of Coinbase is indispensable. Since their IPO in 2021, their performance has been very closely tied to that of Bitcoin (BTC-USD). The gap between the two charts is now larger than ever. I am hereby reiterating my thesis to go long on Coinbase. Data by YCharts Q1 2025 Results As mentioned above, Coinbase reported their Q1 2025 earnings on May 8 by providing investors with a Shareholder Letter . Here's a quick overview of some important developments: Transaction revenue is up 17% YoY, reaching $1.26 billion, and down 19% QoQ, just like the price of Bitcoin. Service revenue reached $2.49 billion TTM (9% QoQ and 37% YoY growth), portraying resilience against Bitcoin corrections. In a $2.9 billion deal ($700 million cash, 11 million COIN shares), Coinbase aims to acquire Sentillia B.V. (Deribit), a leading crypto options exchange with more than $30 billion in open interest and over $1 trillion in trading volume in 2024. Most importantly, however, they did miss EPS estimates of $1.26 and only reported $0.24. This represents a miss of 87%. Revenue fell slightly short of expectations as well, reaching $2.03 billion instead of the anticipated $2.07 billion, which is only a 1.8% miss and less significant. This miss matches perfectly my aforementioned thesis. Despite this prediction, I also thought that Coinbase would drop after missing earnings, but the market seems to have priced this in already since it barely reacted. Q1 '2 5 Shareholder Letter Q1 '2 5 Shareholder Letter I have to mention again how much I love COIN's financial health. Looking at their balance sheet, it becomes clear that they could almost cover ALL liabilities with only their cash and USDC (essentially cash as well) holdings. Cash is going to decrease by $700 million after the planned acquisition of Deribit, but I just believe this goes to show that Coinbase knows when and how to put capital into place to grow their operations. Unlike many other crypto companies, these amounts of cash also make COIN much less likely to dilute shareholders. Q1 '2 5 Shareholder Letter Further Outlook A continued Bitcoin bull market seems inevitable due to the sheer amount of strength we've seen recently. Bitcoin ripped through the resistance at $93.5k and secured it as a new support level. It is now facing a double resistance, at $104.5k and at $106.3k. I believe it is only a matter of time until Bitcoin moves beyond these and reaches new ATHs. In the very near-term, however, we might see a slight correction, due to RSI sitting at 75, which is in the overbought region. TradingView Coinbase will profit greatly from fresh ATHs. First, their digital asset holdings would appreciate to new highs themselves, contributing directly to net income. Second, their transaction volume and thereby revenue grows quickly due to more interest among retail investors. Third, with more euphoria around crypto and Coinbase as a business, investors might bid the stock up higher, making it trade at higher valuations. Valuation From a plain perspective, COIN's P/S ratio seems high, trailing at 7.7X. Keeping in mind that Coinbase are able to achieve net profit margins of up to 40% (last year) and are able to grow revenues quickly in crypto bull markets, it seems less extended. Their P/E currently seems high as well, because of low net income they just reported, which, on a TTM basis, replaced stellar Q1 2024 EPS. Data by YCharts When comparing performance against Robinhood (HOOD), who have become much more engaged in crypto, it is clear that since 2022, both stocks have been closely correlated. Since 2025, Robinhood has decoupled from Coinbase. Data by YCharts This is largely due to the fact that HOOD appreciated in valuation multiples. On a forward EV/EBITDA basis, Coinbase was mostly trading more expensively than Robinhood. This precisely changed at the beginning of 2025, where COIN now trades at a forward EV/EBITDA of 14.4X and HOOD at 25.3X. I'm arguing that both their valuations will eventually draw closer together again, which will help reduce their gap and thus cause appreciation of COIN stock. Data by YCharts Technically, Coinbase is facing a relatively strong resistance - a descending trend line initiated at their 2024 high. They recently got rejected by the set trend line, but a new attempt may be due soon. Their weekly RSI is at 45, which is far from overbought and leaves room for further short-term price increases. Once this resistance is overcome, I can see Coinbase rise well into the $300s. TradingView Risks The main risks I currently see for Coinbase are the following: A market correction: If markets correct further or even a recession takes place, Coinbase would be hit heavily since it depends on market euphoria and speculation in digital assets to drive sales. Their high valuation: They're premium-priced, which leaves them much less room for failure. Growing but not growing quickly enough could be one such issue. In that case, the stock would get re-rated, trading downwards. Conclusion After revisiting Coinbase, I am as convicted of my previous thesis as before. As seen with the Q1 EPS miss, it seems to be working out so far. The much more important part is now the anticipated Q2 and Q4 EPS beats. With crypto prices recovering, I currently don't see any risks towards my thesis other than the ones mentioned. Despite that, I am still downgrading my Coinbase rating from Strong Buy to Buy due to a higher valuation than in my last coverage. I am reiterating my price target of $333.
