In the wake of the Robinhood earnings anti-hype cycle, you might imagine that investors are a bit over the consumer trading game. Robinhood rode the pandemic-induced consumer savings and investing boom all the way to the top and is now on the decline as its active user count falters, its revenue shrinks, and it executes a second round of layoffs.
And yet shares of Coinbase ripped higher this morning, so much so that the company has more than doubled from its recent lows. What’s going on? Not earnings — Coinbase doesn’t report until next week. Instead, an unlikely traditional finance company is in the mix. Let’s talk BlackRock, Coinbase, and what we can learn from Robinhood’s earnings that may impact the crypto giant.
After plans for a BlackRock-Coinbase partnership emerged, Coinbase was also included in a Meta news brief that detailed the media conglomerate’s plans to release digital collectibles to over 100 countries so users could “showcase NFTs on Instagram.”
Meta is also launching crypto wallet integrations with Coinbase Wallet and Dapper Labs and will support the ability to post NFTs minted on the layer-1 blockchain Flow.
Down, then up again
Coinbase direct listed with a reference price of $250 per share. It rose to as high as $368.90 per share before falling to a recent all-time low of $40.83 per share. Therefore, while it’s welcome to shareholders that Coinbase climbed higher in recent days to near $96 per share as of the time of writing, it remains a stock in correction.
Regardless, what is the BlackRock news that has proved so salubrious to Coinbase shareholder value this morning? Per the companies, it’s “a partnership [ … ] to enable access to digital asset capabilities within Aladdin, BlackRock’s end-to-end investment management platform [that will use] Coinbase’s comprehensive trading, custody, prime brokerage and reporting capabilities [allowing BlackRock customers to] manage their bitcoin exposures alongside their public and private investments for a whole-portfolio view of risk.”
BlackRock manages around $8.5 trillion worth of assets, meaning that while the deal is limited to bitcoin to start, the potential of the partnership could be rather large. However, just how big an impact the deal could have on Coinbase, and the crypto market more generally, is far from clear at the moment.
Investors, however, are excited, sending Coinbase shares higher even if returns for the partnership are unlikely to arrive in the near future.
Could the Meta partnership have a greater impact? (Insert the obvious jokes about Instagram getting deeper into the NFT game right when NFT activity has bottomed out.) Well, perhaps?
Even though the NFT market has had a rocky recent history, we’ve seen a number of NFT partnerships across large brands and sports teams in the past week, including Tiffany & Co., Gucci and FC Barcelona. These partnerships aren’t a new trend, as we’ve seen crypto partnerships transpire in the past, but they point to the validity of the crypto subsector as companies look to find business opportunities in the space.
Whether Meta’s partnership will pull on the heartstrings of both its mainstream users and web3 fans is yet to be seen. Regardless, it could be a smart business play that Meta and others have found worth pursuing.
Is it enough?
We’ll get a trailing look at Coinbase’s performance when second-quarter earnings come on August 9. And there is some reason to have modestly positive expectations. Robinhood earnings included $58 million worth of revenue from crypto trading fees, the best result for that asset class at Robinhood since Q2 2021, although sharply depressed from all-time highs.
That modest tailwind could help Coinbase best expectations for the quarter, but it’s worth remembering how low they are. Investors expect Coinbase to lose $2.68 per share, off revenues of $830.5 million. In its year-ago Q2, Coinbase reported $2.03 billion in revenue, leading to net income of $1.61 billion and adjusted EBITDA of $1.15 billion. If Coinbase beats Q2 2022 expectations, it will still be far underwater from its prior cadence.
This makes the growth potential of the BlackRock deal and Meta tie-up all the more important. Coinbase needs to grow lots to just get back to its prior size, let alone post fresh record results. And while deals with high-profile names are investor-pleasing, they can be better headlines than results. The two simply do not appear to have enough heft to close Coinbase’s year-over-year revenue declines, even if they do open up the possibility for more business with both institutions and individuals.