Coinbase Stock Tumbles as Goldman Sachs Cuts Rating to ‘Sell’

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  • Gold­man Sachs ana­lysts low­ered their Coin­base price tar­get from $70 to $45
  • The Wall Street bank expects Coin­base to make fur­ther staff cuts

Coin­base stock fell more than 10% on Mon­day after Gold­man Sachs down­grad­ed it to a sell, cit­ing poten­tial for large rev­enue drops this year.

Gold­man ana­lysts, led by Will Nance, said in a research note that cur­rent cryp­tocur­ren­cy prices and trad­ing vol­umes indi­cate fur­ther declines in Coin­base income. 

Coin­base has his­tor­i­cal­ly gen­er­at­ed more than 90% of its rev­enue from trad­ing fees.

The ana­lysts expect Coinbase’s rev­enue to fall 61% year-on-year in 2022 and by 73% in the sec­ond half of the year alone, as the soured macro out­look con­tin­ues to inflict pain on indus­try heavyweights.

Goldman’s lat­est rat­ing low­ers its price tar­get for Coin­base from $70 a share to $45. The top US exchange’s stock was worth around $56 dur­ing pre-mar­ket trade on Tues­day, hav­ing recov­ered 1% from Monday’s losses.

If Gold­man ana­lysts are on point, Coin­base could see its share price shed anoth­er 20% from here.

Coin­base recent­ly said it would slash its work­force by 18% — or 1,100 employ­ees — in antic­i­pa­tion of a US reces­sion. The com­pa­ny warned its trad­ing rev­enue could be hurt by the cryp­to win­ter, a peri­od marked by an extend­ed down­turn across dig­i­tal assets.

Gold­man expects Coin­base to make fur­ther staff cuts as its down­siz­ing thus far only brings its head­count back to where it was at the end of this year’s first quarter. 

The Wall Street mainstay’s ana­lysts reck­on Coin­base must “make sub­stan­tial reduc­tions in its cost base” to stymie its cash burn as “retail trad­ing activ­i­ty dries up.”

Gold­man is also bear­ish on Coinbase’s deci­sion to sun­set its pro­fes­sion­al trad­er-focused plat­form and uni­fy all trad­ing into a sin­gle application.

“We believe that com­bin­ing these plat­forms will reduce switch­ing cost fric­tion between the two plat­forms and poten­tial­ly lead to fee rate com­pres­sion,” the ana­lysts said.

Coinbase’s stock has drift­ed down­wards ever since it went pub­lic in April 2021 at a val­u­a­tion of more than $86 bil­lion. The company’s mar­ket val­ue is now under $12.5 bil­lion, hav­ing col­lapsed 85% since its direct listing.


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  • Shali­ni Nagarajan

    Block­works

    Reporter

    Shali­ni is a cryp­to reporter from Ban­ga­lore, India who cov­ers devel­op­ments in the mar­ket, reg­u­la­tion, mar­ket struc­ture, and advice from insti­tu­tion­al experts. Pri­or to Block­works, she worked as a mar­kets reporter at Insid­er and a cor­re­spon­dent at Reuters News. She holds some bit­coin and ether. Reach her at [email pro­tect­ed]

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