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Why is coinbase stock dropping today

why is coinbase stock dropping today

Coinbase’s guidance for the rest of the year was also vague. It expects its MTUs to decline sequentially again in the second quarter and come in somewhere between five to 15 million for the full year — which implies anything between a 56% decline to 32% growth from 2021.

It also expects its trading volume to decline sequentially in the second quarter and for its average transaction revenue per user to drop to “pre-2021 levels” for the full year. It expects its subscription and services business to generate “strong growth compared to 2021” as it expands its subscription services for both retail and professional traders — but that segment still only generated 13% of its revenues in the first quarter.

Analysts expect Coinbase’s revenue to decline 40% to $4.7 billion this year, but investors should be skeptical of those estimates because they’re tethered to unpredictable cryptocurrency prices and equally inconsistent trading volumes.

As Coinbase’s top-line growth decelerates, its bottom line is deteriorating. Its net income soared more than 11 times to $3.62 billion in 2021, but slumped to a net loss of $430 million in the first quarter of 2022 as it ramped up its investments. Analysts expect it to post a net loss of $1.66 billion for the full year.

Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased nearly eightfold to $4.09 billion in 2021 but it expects to post an adjusted EBITDA loss of “approximately $500 million” in 2022 as it endures a “prolonged and stressful scenario for our business.”

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