Shares of Coinbase Global Inc. tumbled on Wednesday after the cryptocurrency market released a disappointing earnings report amid slowing digital asset trading.
The company has seen a sharp drop in the number of monthly users transacting on its platform over the past quarter, and it revealed that it expects to see even fewer such users in the current period. . Its shares fell 26% in Wednesday afternoon trading and are on track for their worst single-day percentage drop on record.
Despite the bleaker near-term outlook for the crypto market, analysts have overwhelmingly maintained their bullish view on the company. While at least 13 lowered their price targets, by an average of 40%, no follower by FactSet chose to downgrade the stock following Coinbase’s COIN,
Of the 28 tracked by FactSet that track Coinbase, 20 have buy ratings, six have hold ratings, and two have sell ratings.
Coinbase’s management team has been optimistic about the company’s near-term challenges, with Chief Executive Brian Armstrong saying on the company’s earnings call that the downturn presented “a great opportunity because we are greedy when others are afraid”.
“We tend to be able to pick up great talent during these times and others pivot, they get distracted, they get discouraged,” he said. “So we tend to do our best during a slow period.”
The company is continuing with its plans to make 2022 a year of investing.
At least some of the bullish analysts seemed to buy into this view.
In a note titled “What doesn’t kill COIN makes COIN stronger,” DA Davidson’s Christopher Brendler wrote that his estimates are “falling noticeably again,” but added that he and his team “are in agreement on the management’s commitment to growth and believe investors’ patience will be rewarded.” .”
He retained a buy rating on the stock but cut his price target to $135 from $160.
BTIG’s Mark Palmer said the concerns driving Coinbase’s sharp selloff following the report “seem grossly exaggerated given liquidity and long-term growth prospects.”
Palmer noted that he was “clear-headed about the potential impact of a severe Federal Reserve tightening cycle and the possibility of that cycle leading to an economic recession,” although he said the stock price Coinbase’s action doesn’t give the company credit for its “numerous liquid assets,” such as $6.1 billion in cash and cash equivalents, as well as roughly $1 billion in crypto held for trading purposes. ‘investment.
It also “ignores” Coinbase’s leadership position and new initiatives such as a marketplace for non-fungible tokens (NFTs).
He reiterated a buy rating on the stock, but cut his price target to $380 from $500 on near-term headwinds.
“At the same time, we think it is very likely that investors, at some point in the not too distant future, will look at the levels COIN was trading at today and wonder how it got to those levels. trough given the company’s abundant resources. and its vastly advantaged position in the crypto space,” Palmer wrote.
Needham’s John Todaro also focused on what he saw as the big picture.
“Blockchain rewards could have a greater impact in the second half of the year as well as in later years following the rise of proof-of-stake tokens,” he wrote. “Additionally, we believe that long-term crypto adoption will accelerate and that Coinbase is the best retail on-ramp in existence today.”
Todaro has a Buy rating on the stock, although he has reduced his target price to $173 from $360.
Analysts who had been on the sidelines ahead of the report, however, were less optimistic.
“While the long waiting list to join the NFT platform may generate some positive headlines, the party may be short-lived as NFT interest continues to wane,” Mizuho’s Dan Dolev wrote, which has a neutral rating on stocks and lowered its price target to $135. from $150.
Bernstein’s Harshita Rawat said Coinbase has “over-earned” in terms of fees charged and the “hundreds of dollars” in average revenue per use it generates, based on fees and high transaction volume.
“Thus, COIN’s growth (even outside of broader crypto market performance) is constrained by consumer disposable incomes and increasing competition from crypto-native peers and fintechs,” he said. she writes. “The exception here, of course, is income diversification beyond crypto trading, which is early innings (e.g. lots of work to do on NFTs) and also somewhat tied to asset prices crypto (e.g. custody, staking) – as we saw this quarter.
It retained a market performance rating on the stock, while reducing its price target from $200 to $80 in a note titled: “Spending defiantly in the face of potential crypto winter. Bold or reckless?
“While we understand the desire to reinvest to dominate Web3 UI (and monetization), we are also concerned about whether the increased investment is the result of greater competitive pressures,” he wrote. . “Competition is, in fact, intensifying in almost every area of COIN’s business.”
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Coinbase stock heads for worst drop on record, but fears are ‘grossly exaggerated’, analyst says – CNET – ApparelGeek
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