Breaking: Coinbase (COIN) smashes earnings estimates

• COIN stock is down 31.6% YTD.
• Coinbase is set to report Q4 earnings after the close on Thursday, February 24.
• Wall Street expects $2.25 in normalized EPS on $1.99 billion for the leading cryptocurrency exchange.

UPDATE: Coinbase outperformed expectations by a mile for the fourth quarter. After the market closed on Thursday, the cryptocurrency exchange posted Q4 GAAP EPS of $3.32 on revenue of $2.5 billion. The market had expected consensus GAAP EPS of $1.89 on $1.99 billion in revenue. Though COIN rallied with other tech stocks in a late session rebound, closing up 4% at $179.56, the stock dropped 2% afterhours to $176.

Coinbase (COIN), the operator of the most prominent cryptocurrency exchange in the US, could not have picked a worse session to lay out its Q4 earnings. With Russia invading Ukraine late on Wednesday night, stocks are tanking in the premarket. COIN is no different and is down 7.4% to $160 in the premarket at the time of writing. This is below its prior all-time low of $162.20.

Coinbase Stock News: Rocky revenue, uncertain EPS

Coinbase is expected to release its earnings for the fourth quarter of 2021 during market hours before delivering a call with executives after the session ends on Thursday. Analyst consensus puts adjusted earnings per share (EPS) at $2.25 on $1.99 billion in revenue. Bitcoin price did drop during the fourth quarter, so this may have had a decently large effect on EPS.

Over the past 90 days, COIN has received five upward EPS revisions and four that were revised downward. Since debuting in the markets in April 2021, there have not been enough earnings calls for analysts to get a good grip on forecasting Coinbase's trajectory. For instance, for the full year 2022 the lowest estimate for EPS is $3.91 and the highest is $12.10 out of 18 analysts.

The reason for this uncertainty is that Coinbase's earnings reports thus far have been all over the place. Q1 revenue arrived at $1.8 billion, Q2 at $2.23 billion, only to circle back to $1.31 billion in the third quarter. The topsy-turvy nature of the crypto markets make steady revenue and EPS growth unlikely. Of the three quarters reported thus far as a public company, Coinbase missed revenue estimates twice and missed EPS estimates once.

JPMorgan analyst Ken Worthington anticipates higher prices and volume in Q4 overall helping COIN. In a note to clients, he wrote, "Coinbase's staking revenue will continue to rise, reflecting greater sophistication of Coinbase customers and thus greater use of staking services for Eth2.0." Worthington predicts that trading volume will jump by 40% from Q3.

Coinbase Stock Forecast: COIN at all-time low

Coinbase stock had some focus in early February when it broke through the top trend line of its descending price channel on February 7 and 8. It could not retain the momentum though.

Now COIN is at a new all-time low ahead of Thursday's earnings announcement. Since it has not been in this territory before, it is hard to say where support is. It has broken through the prior all-time low at $162.20. The bottom of the price channel if extended would give a bottom of $110. However, since the top trend line has been broken earlier this month, it is unclear whether the price channel that began on November 9, 2021, is relevant at this time.

On the upside, COIN should target the supply zone between $210.19 and $215.25. This region acted as support during June and July of 2021 and then again as resistance this past month.

COIN 1-day chart