What happened
Shares of cryptocurrency company Coinbase Global (COIN 7.54%) jumped as much as 8.7% in early trading on Wednesday only to fall by 7.6% midday. Shares are down 3.5% at 3:15 p.m. ET.
So what
The market is reacting to Coinbase's earnings release last night, which was good or bad depending on how you look at it. Revenue dropped to $629 million from $2.5 billion a year ago and the net loss was $557 million compared to an $840 million profit last year.
NASDAQ: COIN
Key Data Points
But investors are looking more at trends in spending and more sustainable businesses than trading and there's progress on both fronts. Subscription and service revenue was $282.8 million, up from $213.4 million, and operating expenses were down from $1.58 billion a year ago to $1.18 billion. There will be further reductions after a 20% headcount reduction in January.
Revenue came in well ahead of the $590 million that analysts expected and the reduction in expenses was a pleasant sight. But investors seemed to sour on lower user activity on the Coinbase exchange and sold off the stock late in the day.
Now what
Coinbase is a company that divides a lot of investors and that was evident in trading today. But this is a company that investors need to take a very long-term view on. And if you do that, the results were very good.
Cash burn was just $148 million in the quarter and Coinbase ended with $5.5 billion of cash and equivalents on the balance sheet. That's more than enough to survive for a few years of a down market and even acquire businesses if the price is right. I think five to 10 years from now Coinbase will be a much more valuable company, but the ride will be rocky and today's volatility was a reminder of that.
