Coinbase's Earnings Miss Makes U.S. Election Even Bigger Catalyst: Analysts

• Coinbase shares fell after its third-quarter net revenue missed Wall Street's estimates.
• Institutional interest in the stock is growing as it becomes a more important component of various equity indices, JMP said.
• The U.S. presidential election is an important short-term catalyst for both Coinbase and the industry, and may lead to a more benign regulatory backdrop, the analysts said.

The U.S. election is now an important short-term catalyst for crypto exchange Coinbase (COIN), after it missed third quarter expectations tanking share prices.

The stock dropped more than 7% on Thursday after the crypto exchange reported a top-line miss for the third quarter.

The investment bank KBW said in a research note that the company's total net revenue was 3% lower than its forecast and 5% below consensus estimates. The miss was driven by lower transaction revenues and a drop in subscription and services revenues, the report noted.

Still, reduced operating expenses more than offset the revenue miss and contributed to a better adjusted Ebitda figure, said KBW, which has a market perform rating on the stock and a $165 price target. The analysts noted that retail trading volumes were higher than expected but were offset by a compression in the retail fee rate, adding that fourth-quarter commentary was also weak.

Another Wall Street broker, JMP, saw the crypto exchange's focus on the product roadmap as positive as it is expected to drive further mainstream adoption. The broker also noted that institutional interest in Coinbase is growing as it has become a more meaningful component of various stock indices, which is a positive development. JMP has a market outperform rating on Coinbase stock with a $320 price target.

More importantly, JMP noted that the U.S. presidential election is likely to be a positive catalyst for both Coinbase and the wider crypto market. The election is set to bring forth "greater clarity and building consensus among legislators on both sides of the aisle in the coming months," JMP noted.

Canaccord echoed this sentiment, saying that a change in the regulatory regime following the U.S. election next week could be a larger catalyst in the short term.

A clearer regulatory framework could result in the dismissal of the current Securities and Exchange Commission (SEC) case against Coinbase, Canaccord said.

Canaccord, which has a buy rating on Coinbase stock with a $280 price target, also had some positive commentaries on the third-quarter earnings. It said Coinbase continued to grow its business model in the quarter, despite lower market volatility and trading volumes, with more revenue coming from recurring sources such as staking and custody.

UPDATE (Oct. 31, 13:00 UTC): Updates headline, story throughout to reflect next catalyst for Coinbase's stock.