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Shares of crypto exchange Coinbase rose 7 percent Wednesday morning after the company reported better-than-expected second quarter profits.
The digital coin exchange late Tuesday reported $1.6 billion in net profit for the quarter, representing earnings per share of $3.45. That eclipsed Wall Street’s expectations of $2.33 per share.
Coinbase trading volumes also surged 38 percent to $462 billion during the second quarter.
The company, whose success is tethered to risky digital assets like bitcoin, warned that it third quarter trading volumes will be lower than the second quarter.
Investors seemed to brush off the warning, however, sending the stock up 7 percent on Wednesday to $288.22. Coinbase shares have surged about 15.2 percent over the past month, but are remain far below it’s April stock debut price of $381.
Coinbase faces other potential performance pressures, including the growing prospect of government regulation, which could dampen profits for both individual traders and companies like Coinbase that rake in cash through transaction fees.
Securities and Exchange Commission head Gary Gensler said last week that crypto traders need more investor protections, calling the digital currency world “rife with fraud, scams and abuse.”
In Coinbase’s Tuesday earnings call Chief Financial Officer Alesia Haas told investors the company is watching the SEC closely.
“We’re eager to understand the legal framework for the concerns that he has raised and how any of those may impact our product roadmap,” she said.
Even while acknowledging the threat of government regulation, analysts from Wedbush Securities set a 12 month price target of $300 for Coinbase shares, predicting “strong earnings power for the next 3 to 5 years.”
“On the other hand, the stock will likely continue to be volatile given multiple broad factors, mostly related to the regulatory environment,” Wedbush analysts Moshe Katri, Dan Ives and Ryan Campbell added.
Other analysts have raised concerns about Coinbase’s profits and stock price being too tied to the highly volatile price of bitcoin, the most popular cryptocurrency.
But the company’s second quarter results show Coinbase customers are increasingly investing in a wider variety of digital coins.
Bitcoin trades comprised 24 percent of Coinbase’s trading volumes for the quarter, down from 39 percent in the first quarter.
With Post wires
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