Goldman Bullish on Online Brokers’ 4Q Earnings Due to Crypto Activity, Retail Trading

Goldman Sachs is bullish about the prospects for fourth-quarter earnings for online brokers due to a surge in crypto-trading revenues and increased activity from retail investors.

Crypto exchange Coinbase, bank Silvergate Capital and trading platform Robinhood are expected to post the strongest results relative to estimates, the bank said in a note published Tuesday. Goldman expects total crypto-trading revenue at Coinbase and Robinhood to rise 62% and 18%, respectively, from the previous quarter.

Here’s what the Wall Street giant said:

Coinbase (buy rated, price target (PT) cut to $352 from $387)

Large volumes in shiba inu during the quarter are indicative of strong retail-trading volumes. The company’s robust profitability/cash flow is seen as a differentiator across fintech, and more color about the timing of the company’s non-fungible token (NFT) platform is expected. Continues to view Coinbase as the “blue chip way to gain exposure to the crypto ecosystem.”

Robinhood (neutral, PT cut to $23 from $31)

Expects a beat due to improved retail activity rates and higher crypto volumes, noting that guidance for the quarter was very conservative. Remains cautious on fundamentals and says recent performance sets a relatively low bar. If the company can return to positive account growth, says the shares may be poised for a relief rally.

Silvergate Capital (neutral, PT unchanged at $190)

Forecasts a “solid top-line beat,” noting that the company’s intra-quarter update showed strong growth in deposits with an average balance of $12.9 billion through Nov. 30. Sees less alpha upside and expects the shares to trade more with a crypto beta. Says risk is skewed to the upside at current levels with ~48% upside to its $190 price target.

Charles Schwab (neutral, PT raised to $94 from $83)

Robust trading activity to drive the second-highest quarter in company history for trade commissions, beaten only by first quarter 2021 meme stocks. Sees potential benefit from future rate hikes.

Interactive Brokers (neutral, PT raised to $96 from $81)

Earnings beat to be driven by higher trading commissions and margin loans. Notes the company’s sensitivity to higher interest rates.

Bank of N.T. Butterfield & Son (buy, PT raised to $49 from $40)

Modest earnings-per-share beat expected on in-line revenue and a slight benefit from lower expenses.