The biggest takeaways from this week’s crypto-related earnings
The biggest takeaway from the earnings of crypto-related firms this week is not how bad the results were, but what they did to weather the so-called crypto winter.
More mundane factors like cost cutting, higher interest rates and improved crypto accounting helped them beat expectations for revenue, earnings and customers. That may be a small tribute to the once high-flying stocks that were fueled by a craze for digital coins last year. But that’s what the investors got.
Here’s what happened.
Bitcoin and MicroStrategy
In MicroStrategy’s ( MSTR ) earnings Tuesday, bitcoin was much less prominent in its finances compared to last quarter, when the company posted a quarterly loss of $917.8 million due to a decline in the value of its bitcoin. That’s largely thanks to bitcoin’s lower volatility over the quarter.
The business intelligence company that became the largest corporate bitcoin holder reported a $727,000 drop in the value of its digital assets – the lowest since first buying BTC two years ago.
As earnings came to light, MicroStrategy hit on adjusted earnings per share. The stock is up 7% from $258 to $277 per share between earnings and Friday’s close. So far this year, there has been a decrease of 49 per cent.
In addition, former CEO and now executive chairman Michael Saylor also offered optimistic guidance on how the company’s bitcoin impairment issues could one day become even less of an income statement problem.
In October, the Financial Standards Accounting Board (FASB) unanimously decided to recognize digital assets at fair value. This ultimately means that the current practice – reporting crypto holdings at their lowest value in the quarter and failing to mark up the value if the asset rises during the quarter – will disappear.
“That doesn’t mean we have enough guidance to change our accounting,” Saylor said during MSTR’s earnings call. “It will likely be late 2023 or fiscal 2024 when the changes to the financial statements take place.”
Robinhood being disciplined?
While Robinhood ( HOOD ) lost 1.5 million more monthly active users (MAUs) than expected during the quarter, it beat revenue and earnings expectations by thin margins Wednesday afternoon. HOOD shares have since risen 7% at Friday’s close from $11.41 to $12.24. Year to date, it is down 30.8% from $18 per share.
It turns out that investors may care less about the firm’s retail interest and more about the sharp cuts it has made to reach profitability in the bear market. Robinhood’s biggest win in the third quarter was “cost discipline,” according to Will Nance, vice president of equity research at Goldman Sachs.
“We believe HOOD’s results make a strong case for their ability to invest in the platform with a much leaner cost structure, despite a weak customer acquisition environment,” Nance wrote in a Wednesday note.
The company, known colloquially as the ongoing retail platform for younger investors, also benefited from higher interest rates throughout Q3 – net interest income increased 73% to $128 million. And at least on the surface level, cost-cutting measures do not affect the ability to roll out new products.
Robinhood CEO Vlad Tenev said during HOOD’s earnings call on Wednesday that the company still plans to debut Roth IRA accounts on its platform “just in time for tax season.”
Coinbase is… okay?
The largest US crypto exchange began its third quarter shareholder letter admitting that “Q3 was a mixed quarter for Coinbase.” The company missed expected estimates on revenues and earnings.
COIN stock fell as much as 8% in the minutes after the release on Thursday, but by the earnings call the stock had reversed course, rising 4.5% in after-hours trading. The stock closed Friday up 5% on the day at $58.8, although it lost 78% of its YTD value from $256 per share.
Mark Palmer, a fintech analyst with BTIG, said “at first glance, Coinbase Global’s (COIN) Q3 financials. [the report] seemed disappointing, even in the context of a digital asset exchange operating in the midst of a severe ‘crypto winter’.”
Its biggest profit generator – transaction fees from retail merchants – came in 44% lower than last quarter ($346 million vs $616 million, ouch!). Its betting income, which has been touted as a critical profit generator that is less volatility-driven than trading volume, also underperformed ($62 million vs. $68 million).
However, analysts saw the ability of crypto exchanges to hang on to customers (even if they were mostly “hodling”), earn interest income from US Treasuries and cut costs.
Coinbase reported an adjusted EBITDA loss of $116 million versus expectations for a loss of $212.95 million. Users with monthly transactions shrank by 500,000 from 9 million to 8.5 million, but beat expectations of 7.4 million.
“A lot of these companies were just growing without a lot of restraint until this year. I think you’re seeing a lot of that spending was discretionary. The market is realizing that you don’t have to spend and hire to function properly,” said Chris Brendler, senior analyst at DA Davidson. to Yahoo Finance.
Still, Coinbase CFO Aleisa Haas offered investors a cryptic warning about the company’s future prospects.
“As we approach 2023 planning, we are now preparing with a conservative bias, and similar current macroeconomic headwinds will persist, and potentially intensify. We are not giving any quantitative outlook at this time, she said in the call on Thursday afternoon.
David Hollerith is a senior reporter at Yahoo Finance covering cryptocurrency and stock markets. Follow him on Twitter at @DsHollers
Click here for the latest crypto news, updates, values, prices and more related to Bitcoin, Ethereum, Dogecoin, DeFi and NFTs
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for apple or Android
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flip board, LinkedInand YouTube
