Analysts expect Coinbase to report lower revenues during its second quarter earnings call Thursday amid a trading volume slowdown. But the exchange could offset that decrease via other business lines, and remains undervalued, some analysts say.

Oppenheimer analysts Owen Lau and Guru Sidaarth expect Q2 revenue to drop to $1.36 billion, a possible decrease from $1.6 billion worth of revenue during the year’s first three months.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) could go down to $555 million, they added in the July 21 research note — a sizable fall from the $1 billion last quarter.

Read more: Coinbase cross-selling on display during impressive Q1

Decreased trading revenue drove the lower estimates as volumes were hurt (down an estimated 31% quarter-over-quarter) by relatively stable bitcoin prices.

“It appears that the halving effect was priced in before the actual event and countered by outflows in spot bitcoin ETFs,” Lau and Sidaarth wrote. “Some of the volume was pulled forward to March, which had an exceptional month.”

Subscription and services revenue — comprising various business lines outside of trading — should see a lift, though.

The analysts, who expect a 10% quarter-over-quarter increase in that area, note higher stablecoin and blockchain revenue. The average market cap of USDC “showed signs of sustained recovery,” they note.

In addition to USDC’s recovery, Morningstar equity analyst Michael Miller said higher crypto asset valuations are set to help offset the lower volumes.

“All in all, I have pretty high expectations for Coinbase as market conditions remain favorable,” he told Blockworks.

International business, Base

Aside from the numbers, Miller said he will be listening for executive commentary about the growth of Coinbase’s international business.

Launched in May 2023, the Coinbase International Exchange reached $76 billion in notional volume traded during the first quarter. There were 30 perpetual futures contracts listed on the the exchange as of the end of March, offering access to roughly 80% of global perpetual futures volume, according to the company.

“We have seen a solid start for their international exchange, but it does carry lower fees per trade than its core business,” he explained. “So there is a question about its long-term revenue potential.”

Miller is also seeking guidance related to the crypto exchange’s non-trading revenue sources like its layer-2, Base, as well as its custody business. Coinbase is a custodian to nearly all the spot BTC and ETH ETFs trading on the US market.

“I’m interested in how they are viewing [those businesses] and [their] long-term monetization potential,” he added.

Many are likely paying particular attention to the evolution of Base, given its potential as a revenue driver and its service in allowing developers to build apps onchain.

Base’s developer activity increased by eight times from the fourth quarter of 2023 to the first three months of this year, Coinbase said in its May 2 shareholder letter. The layer-2 had processed twice the number of transactions than Ethereum in the prior 30 days, the company added at the time.

Read more: Base closed in on 2 million users in 2023: Report

But Oppenheimer analysts warned investors about overhyping the business line. They estimate that Base generated revenue of $20 million during the second quarter, down from $32 million during the previous three months.

Stock ‘highly underappreciated’

Coinbase’s stock price was roughly $231 at 10 am ET Wednesday — up 47% year to date but relatively flat over the last month.

A big boost could come for Coinbase if Trump is elected in November, Lau and Sidaarth said. The former president said during the Bitcoin 2024 conference last week that, if elected president, he would fire SEC Chair Gary Gensler and “keep 100% of all bitcoin the US government currently holds or acquires.”

Read more: On the Margin Newsletter: Trump’s crypto ‘promises’ at Bitcoin 2024

The analysts added: “With increasing regulatory clarity, adoption and potential S&P 500 inclusion, we believe Coinbase’s long-term thesis is highly underappreciated, given the massive attention on current volume and regulations.”