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Robinhood’s Q4 Earnings Spell Good News For Coinbase

Last night, Robinhood (HOOD) reported better-than-expected earnings leading to the stock popping more than 10% in trading today.

The earnings beat was driven primarily by the company reporting crypto transaction revenue increasing by 10% to $43 million in the quarter.

Furthermore, Robinhood reported that crypto volume was up 63% from the month prior and 89% quarter-over-quarter.

While none of this was really a surprise, as bitcoin and other cryptoassets have been on the rise in recent months, the exact retail trading data and tone from the earnings call were interesting.

During the call, Robinhood’s CFO Jason Warnick noted that although the company has listed all 11 bitcoin ETFs, only 5% of the overall trading in crypto products was through ETFs – 95% was still being traded directly. Furthermore, Warnick explained that the 5% in trading was “additive.”

We’ve previously written that investors should to keep an eye on Robinhood as a bonafide crypto stock. Yesterday’s results only prove that point, with CEO Vlad Tenev stating, “we think we can be the leading player in bridging the worlds of traditional finance and crypto.”

What Does This Mean For Coinbase?

Tomorrow, after the close, Coinbase will report Q4 earnings as well. With data regarding the increase in retail trading volume on Robinhood, we can begin to make some educated guesses about how well Coinbase did last quarter.

We can do this by making assumptions on a few data points.

  1. Total retail crypto volumes

  2. Average retail take rate

To calculate Coinbase’s retail crypto trading volumes, we can use Robinhood as a proxy since all their trading volume comes from retail traders.

While Robinhood’s crypto volumes rose 89% quarter-over-quarter, Coinbase’s volumes were likely higher, being the go-to crypto exchange and all. Still, in our calculation, we used a range of potential trading volumes from an 80-120% increase.

Using the company’s previous quarterly retail trading volume of $11 billion, we get an estimated volume ranging from $19.8–24.2 billion.

Next, we need to assume what percentage of this retail trading volume Coinbase took in trading fees. Previous quarters have ranged from ~1.7–2.5%. In bull markets, Coinbase usually has a higher take rate, so for our calculation, we looked at a range of 1.9–2.5%.

Using these two estimates, we estimate Coinbase’s retail trading revenue of $376–605 million. 

Historically, Coinbase’s retail trading revenue represents ~50% of its total revenues. So for a super quick and dirty calculation to get their total revenue, we can just double this number. 

Doing this, we estimate that Coinbase’s Q4 revenue will come in at a mid-range of $968 million.

With the Street’s consensus estimate being $824 million, we predict a massive beat for the company.

At this point, you should be asking yourself if this is nonsense or not… and for good reason.

We did a lot of rounded calculations here. While you shouldn’t take this as investment advice, and you should always do your own due diligence, we hope this gives you a simple way to look at Coinbase’s earnings results.

Furthermore, to get a more granular look from other sources, we suggest taking a look at the predictions from Kunal Goel (prediction = $866M net rev) and CBduck (prediction = $1.06B net rev).

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