Moshe Katri, Wedbush Securities Managing Director of Equity Research joins Yahoo Finance Live to break down Coinbase's latest earnings report and the future of the crypto market.

Video Transcript

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- Coinbase is reporting a loss here for its fourth quarter but revenue coming in slightly better than expected. We saw revenue of $629.1 million. The street was expecting $581.1 million transaction revenue off 86% year over year. Let's talk a little bit more about this report. We want to bring in Moshe Katri at Wedbush Securities Managing Director Equity Research covering IT services and payments Moshe, it's great to see you again.

So first we initially saw a pop here in extended trading following this release. Now shares are in negative territory. What's your takeaway and also about the volatility that we're seeing here in extended trading?

MOSHE KATRI: Not surprising. I would say the numbers were mixed. The better on revenues subscription and service revenues looked better than expected, a bit lighter under profitability. Guidance for subscription for Q1 is actually up sequentially, that's probably a bit more of a positive than a negative. I just think there's a lot of noise around in terms of the regulatory part of the business.

And I think that probably continues to win weigh in on the shares in general until we get better clarity in terms of where the regulators are going to go. From our perspective, it just feels that this management team is doing all the right things. In terms of being able to survive this perfect storm that we're seeing right now and probably thrive just because they continue to operate in a very, very tough neighborhood.

And at this point, it seems that this is probably one of the few players that's still up there and doing well.

- They describe it as a year of regulatory focus albeit one they can benefit from in the release. If you could talk a bit about that regulatory backdrop and how they could benefit from it this year.

MOSHE KATRI: Yeah. So the regulators will be focusing on a couple of things, safety, security, and transparency. And from our perspective, it seems that they're doing really well in all of these aspects if you will. There's no doubt that the cost of doing business will go higher. But on the flip side of it, this is a company that in 2021 generated North of $14 in earnings per share.

So it shows you what leverage you have in this model if things stabilize and if we get better transparency and better visibility and where the regulators are going to go. And obviously, you're assuming here that you're not going to get through some black swan event where the regulators come out one day and say, hey, nobody can own any crypto asset.

But if we get some stabilization, if we get some visibility on where the regulators are going to go. And again, you're focusing on three things, as I said, transparency, safety, and security. And these guys despite all these things that are going around here, most of their competitors are crashing here and the business is still here. And again, you can just look at what this management team has done.

The focus continues to be on monetizing the retail part of the business, the institutional side of the business. When these guys went public, the biggest concern about crypto was that you will see trading fees or trading revenues compressing. That has not happened, and it just feels that you have an institutional base and user base continues to be relatively loyal here, and that's why the business has been relatively sticky.

- The Kraken settlement with the SEC, how does that impact Coinbase? And if you could weigh in on this whole discussion around staking that we are really hearing about pick up in recent weeks.

MOSHE KATRI: It's all about your ability to provide that safety net for investors. If you're able to show the regulators that you have enough funding or liquidity to go through some cash crunch, I think you should be in decent shape and that's how we look at it.

- Moshe, when it comes to regaining that trust, I think a lot of people are out there. Many people that have been invested in crypto in the past ahead of this last crypto winter are staying on the sidelines still just very hesitant about getting back in. What can Coinbase do or what more do you think they should do, if anything, to help win back some of that trust?

MOSHE KATRI: We believe the regulators have to do more to get to those three aspects that everybody's going to be focusing on. When that gets resolved, I think that the rest is going to be pretty easy to go by, if you will.