Crypto Currents: Crypto firms report Q3 earnings

As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week’s top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.

CRYPTO FIRMS REPORT EARNINGS: On Wednesday, Coinbase (COIN) reported third quarter earnings per share of 28c on a revenue of $1.2B, which compared to a loss per share of (1c) for the same period last year and analyst estimates for revenue of $1.25B. The company also reported that in October, the board of directors authorized a $1B share repurchase program. Coinbase also said it expects Q4 subscription and services revenue to be within a range of $505M-$580M and Q4 transaction expenses to be in the mid-teens as a percentage of net revenue. The company expects technology & development and general & administrative expenses to range from $690M-$730M and sales and marketing expenses to increase quarter-over-quarter to $170M-$220M.

The company said, “Q3 was a solid quarter for Coinbase across our three priorities for 2024: driving revenue, crypto utility, and regulatory clarity. In Q3, we generated $1.2B in total revenue and $75M in net income. Q3 was our 7th consecutive quarter of positive Adjusted EBITDA, which was $449M. And despite softer market conditions, we saw average native unit growth across staking, on-platform USDC, and custody, which helps diversify revenue over the long-run. We continue to build great products, with a focus on some of the building blocks that are now in place to help bring one billion users onchain. In Q3, we made significant progress advancing some of these building blocks — notably, integrating stablecoins across our product suite and growing the Base network — which is now the #1 L2 in terms of both transactions and total value locked.”

Following the report, Barclays raised the firm’s price target on Coinbase to $204 from $175 and kept an Equal Weight rating on the shares. The company’s Q3 revenue and adjusted EBITDA missed estimates and volumes “were just a hair below” but an outsized contribution from low-/no-fee stablecoin pair trading resulted in a more meaningful retail transaction miss, the analyst said.

Additionally, BofA raised the firm’s price target on Coinbase to $214 from $196 and kept a Neutral rating on the shares. With consistent product launches and innovation, Coinbase remains in a strong position to benefit from long-term crypto adoption, said the analyst, who is raising 2025 and 2026 EPS estimates to $5.88 and $8.55 from $5.55 and $7.82, respectively.

Needham also raised the firm’s price target on Coinbase to $290 from $260 and kept a Buy rating on the shares. The company beat the firm’s estimates but missed consensus primarily driven by lower than Street expected crypto trading activity, the analyst said. Needham added however that a muted activity can be turned around in the event of a Trump win, which would increase crypto product offerings at Coinbase and spur increased trading activity in the space

Meanwhile on Tuesday, Visa (V) announced a partnership with Coinbase. This partnership adds convenience and new services for Coinbase customers across the U.S. and EU, including real-time, reliable, and secure money movement. By integrating with the Visa Direct network, Coinbase customers will be able to deposit funds into their Coinbase account in real-time using eligible Visa debit cards. Coinbase already has millions of users with a debit card connected to their account, and this new feature will help unlock real-time delivery of account funds for those using an eligible Visa debit card.

Additionally on Thursday, Riot Platforms (RIOT) reported Q3 loss per share of (54c) on a revenue of $84.8M, which compared to analyst estimates of a loss per share of (16c) on a revenue of $95.35M. The company produced 1,104 bitcoin during the quarter, in-line with the 1,106 bitcoin mined during the same three-month period in 2023.

“I’m pleased to announce Riot’s results for the third quarter 2024, the first full quarter past the bitcoin ‘halving’ event, during which Riot continued to achieve significant growth while maintaining industry-leading low power costs,” said Jason Les, CEO. “Riot also ended the quarter having maintained our robust balance sheet strength, with approximately $1.3B in cash, restricted cash, marketable equity securities, and 10,427 bitcoin held. Looking forward, I am incredibly excited about our future path, as our teams continue working to develop and deploy even more power capacity and hash rate across Texas and Kentucky, towards Riot’s next goal of achieving 100 EH/s in self-mining capacity.”

Following the report, H.C. Wainwright recommended using the post-earnings selloff in shares of Riot Platforms as a buying opportunity. Investor sentiment should shift positive after operational improvements are realized, the analyst said. The firm noted Riot reported mixed Q3 results and lowered its hash rate outlook for both 2024 and 2025. H.C. Wainwright believes the shares “have reached an important inflection point” after underperforming the group in 2024. Riot’s “rapid growth” in deployed capacity over the past couple of quarters paired with recent improvements in operational efficiency will reward shareholders in the coming quarters, it contended. The firm reiterated a Buy rating on Riot Platforms with a $17 price target.

Additionally, Compass Point lowered the firm’s price target on Riot Platforms to $13 from $18 and kept a Buy rating on the shares. After the company reported “poor” Q3 results that included revenue and adjusted EBITDA coming in below the firm’s prior estimates, Riot also lowered its 2024 year-end hash rate target slightly by 1.4 EH/s to 35 EH/s year-end and its 2025 target from 56.6 EH/s to 46.7 EH/s, the analyst noted. This can be attributed to permitting delays in Kentucky, potential supply-chain constraints for transformers at Corsicana, and also the firm believes to “dial back previous aggressive targets.” Riot’s cost structure “continues to look elevated compared to lower-cost peers,” but the firm sees a path for Riot to improve its current hash costs considerably from continued scale at Corsicana and stronger uptime, the analyst added.

MICROSTRATEGY ANNOUNCES $42B BITCOIN PLAN: On Wednesday, MicroStrategy (MSTR) reported Q3 loss per share of ($1.72) on a revenue of $116.1M, which compared to analyst estimates of a loss per share of (14c) on a revenue of $122.7M. As of September 30, the carrying value of the company’s digital assets was $6.851B. Year-to-date, MicroStrategy’s BTC Yield is 17.8%. The company is revising its long-term target to achieve an annual BTC Yield of 6% to 10% between 2025 and 2027.

“Our focus remains to increase value generated to our shareholders by leveraging the digital transformation of capital. Today, we are announcing a strategic goal of raising $42B of capital over the next 3 years, comprised of $21B of equity and $21B of fixed income securities, which we refer to as our ’21/21 Plan.’ As a Bitcoin Treasury Company, we plan to use the additional capital to buy more bitcoin as a treasury reserve asset in a manner that will allow us to achieve higher BTC Yield,” said Phong Le, President and CEO.

Following the report, Canaccord raised the firm’s price target on MicroStrategy to $300 from $173 and kept a Buy rating on the shares. The firm noted they announced a $21B ATM offering. Management stated that it intends to use this vehicle, along with opportunistic fixed-income offerings, to acquire up to another $42B of bitcoin over the next three years and Canaccord believes the strategy makes sense.

Additionally, TD Cowen raised the firm’s price target on MicroStrategy to $300 from $200 and kept a Buy rating on the shares. The firm said benign operating results were overshadowed by an ambitious new capital plan intended to solidify MicroStrategy’s position as the world’s leading Bitcoin Treasury Company.

Meanwhile, Cantor Fitzgerald raised the firm’s price target on MicroStrategy to $312 from $200 and kept an Overweight rating on the shares. MicroStrategy, whose core business is being a business intelligence and analytics software provider, reported Q3 results, but its valuation is “entirely driven by its Bitcoin strategy,” the analyst said. The “biggest news” was its newly-announced “21/21 strategy”. At current levels, about $11.8B of new bitcoin is created each year from mining and MicroStrategy’s new strategy would “effectively eat all new bitcoin supply, creating further scarcity,” which the firm sees as “extremely positive for bitcoin” and “bullish for the premium that MSTR trades on over its bitcoin position.”

CORE SCIENTIFIC INITIATED WITH BUY: Jefferies initiated coverage of Core Scientific (CORZ) on Monday with a Buy rating and $19 price target. The company’s journey over the past year “represents an impressive post-bankruptcy comeback story” as it leverages its significant access to power to build artificial intelligence-focused data centers, the analyst said. The firm believes Core Scientific deserves credit for an experienced data center development team “that is capable and prepared for this pivot.” The company is uniquely well positioned to “capture this moment of AI demand,” contended Jefferies.

BITFARMS, STRONGHOLD ENTER SECOND HOSTING AGREEMENT: Bitfarms (BITF) announced Thursday it entered into (SDIG) at Stronghold’s Scrubgrass site in Pennsylvania. Under the terms of the agreement, Bitfarms will deploy an additional 10,000 miners, originally expected to be used for its Yguazu, Paraguay site, to Stronghold’s Scrubgrass site. Energization is anticipated to start in December 2024.

“Optimizing our assets with these rapid upgrades at Stronghold’s Pennsylvania sites will provide significant near-term value for Bitfarms,” stated Ben Gagnon, CEO. “The 20,000 miners we are deploying at the two sites between the two hosting agreements will boast efficiency of ~20.5 w/TH, continuing to improve our overall fleet efficiency. Vertically integrating our operations with Stronghold’s existing power generation infrastructure reduces capital expenditure requirements and allows us to take greater control over our cost of power via energy trading and better utilization of the T21’s wide range of operating modes. We look forward to completing our acquisition of Stronghold and executing our strategy to increase our U.S. footprint and diversify beyond Bitcoin mining.”

The initial term of the agreement will expire on December 31, 2025, after which it will automatically renew for additional one-year periods unless either party provides written notice of non-renewal. Pursuant to the agreement, Bitfarms will pay Stronghold a monthly fee equal to fifty percent of the profit generated by the Bitfarms miners. In connection with the execution of the agreement, Bitfarms also deposited with Stronghold $7.8M, equal to the estimated cost of power for three months of operations of the Bitfarms miners, which will be refundable in full to Bitfarms at the end of the initial term.

CANAAN AWARDED ORDER FROM CLEANSPARK: Canaan (CAN) announced that Canaan U.S. has entered into a purchase agreement with a new customer, CleanSpark (CLSK), for its Avalon A1566I miners. According to the purchase agreement, Canaan U.S. will provide CleanSpark with 3800 Avalon A1566I Immersion Cooling Miners. The miners, with average compute power of 249 Terahash per second without overclocking, are scheduled to be delivered in Q4.

“We are thrilled that CleanSpark has chosen Canaan’s high-performance mining solutions to advance their state-of-the-art immersion facilities. CleanSpark operates one of the industry’s highest-performing and most power-efficient mining fleets, led by a skilled team committed to maximizing efficiency and pursuing strategic site acquisitions,” said Nangeng Zhang, Chairman and CEO. “We look forward to seeing our immersion-cooled miners integrated into CleanSpark’s impressive, vertically integrated system.”

CRYPTO STOCK PLAYS: Publicly traded companies in the space include Bit Digital (BTBT), Coinbase, Core Scientific, Greenidge Generation (GREE), Mara Holdings (MARA), MicroStrategy, Riot Platforms, Stronghold Digital Mining and TeraWulf (WULF).

PRICE ACTION: As of time of writing, bitcoin rose about 7% this week to $71,114 in U.S. dollars, according to CoinDesk.