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Coinbase reports $1.1 billion loss amid crypto winter

Yahoo Finance's David Hollerith discusses Coinbase earnings, its crypto holdings, why the stock is up today, and what investors expect from the exchange going forward.

Video Transcript


BRIAN CHEUNG: Welcome back to "Yahoo Finance Live." Well, equities ripping higher, but so is crypto on this Wednesday morning. When we take a look at Bitcoin, up about 3% to just short of 24,000 this morning. You can see Ethereum getting a bump as well. I want to call attention to XRP because Ripple Labs, which is behind XRP, apparently rumored to be interested in buying the bankrupt crypto lending firm Celsius. That's according to Hannah Lang's-- Hannah Lang over at Reuters who-- that just crossed the terminal recently.

But also want to call attention to some crypto stocks on the move this morning, specifically Coinbase, which is up about 5 and 1/2% this morning, despite the crypto exchange operator reporting a loss of over $1 billion in the quarter and missing analysts' estimates. For more on this, let's bring in Yahoo Finance's David Hollerith with the details on exactly how Coinbase did. It's been almost a meme stock, David. It moves up and down quite a lot. But what did you hear from the earnings call about what's happening with the company yesterday?

DAVID HOLLERITH: Yeah, well, Brian, I think we should start with the $1.1 billion loss, which about $647 of that didn't come from non-cash impairments, meaning a lot of this-- a lot of the loss had to do with the fact-- or the heightened loss had to do with the fact that they hold crypto assets on their balance sheet. So that does offset it a little bit. It just has to do with how crypto assets are accounted for.

But I think that one reason for the rally, if we're not going to necessarily look at how CPI data might have affected performance of the stock, would be the fact that many analysts have seen that Coinbase calculates their cash in sort of a complicated way in which the cash and cash equivalents they list on their balance sheet isn't the total amount of cash they hold. So I think that there's a little bit more optimism there.

So that being said, earnings were expectedly bad. Just going through the numbers, they missed Wall Street expectations on revenue, trading volume, assets held on the platform, and earnings per share. Investors took sort of a $4.98 loss per share following that announcement.

But sort of to go on the other side, it's-- Coinbase's subscription and services revenue, which is only about 18% of total revenue, held out stronger than the Street expected, which looks pretty good because a lot of analysts see this as an opportunity for them to diversify away from crypto trading volume, which obviously is completely susceptible to the whims of the market. So that being said, looking to Q3, it seems like what a lot of analysts are saying is they're looking for expectations that Coinbase is going to sort of slow on M&A action and just keep a tight balance sheet to weather out the storm, so to speak.

BRIAN CHEUNG: All right, nine mentions, by the way, nine mentions of crypto winter on the earnings call yesterday. Yahoo Finance's David Hollerith, thanks so much for the breakdown.