Goldman Sachs says Coinbase may need to sack more workers; downgrades its stock rating to sell

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Lead­ing invest­ment bank Gold­man Sachs has down­grad­ed Coinbase’s stock rat­ing to sell from neu­tral and reduced its price tar­get from $70 to $45 in its lat­est note, CNBC report­ed June 27.

The down­grade was caused by the bear mar­ket, lead­ing to cryp­to-assets val­ue plum­met­ing to new lows. Coin­base stock saw a 5.7% drop to $59.40 in pre­mar­ket trad­ing after the report.

Coinbase’s rev­enue is depen­dent on the trans­ac­tion fees it charges its retail users.

But with the trad­ing activ­i­ty of this group declin­ing mas­sive­ly due to ris­ing infla­tion and the cryp­to mar­ket down­turn, Gold­man Sachs pre­dicts that the exchange rev­enue could be cut by as much as 61%.

This would be a heavy blow for Coin­base as it report­ed heavy loss­es in the sec­ond quar­ter of 2022.

Coinbase may need to sack more workers

The Bri­an Arm­strong-led exchange has been try­ing to cut costs and recent­ly laid off 18% of its work­force, cit­ing declin­ing rev­enue and cur­rent mar­ket conditions.

Mean­while, its effort to diver­si­fy its rev­enue has not been entire­ly suc­cess­ful. Its recent­ly launched non-fun­gi­ble token mar­ket­place has seen lit­tle sales since its launch.

Accord­ing to Gold­man Sachs, Coin­base will need to reduce its expen­di­ture to stem the result­ing cash burn. It added that the com­pa­ny would have to decide between dilut­ing its share­hold­ers or reduc­ing employ­ee com­pen­sa­tion to stay afloat.

Other crypto stocks are at risk too

Coin­base stock is not the only cryp­to-relat­ed stock cur­rent­ly fac­ing head­winds. Accord­ing to Bloomberg, most pub­licly trad­ed cryp­to-relat­ed com­pa­nies have seen mas­sive declines in their stock value.

Almost all pub­licly trad­ed cryp­to-exposed com­pa­nies, like Micros­trat­e­gy, Sil­ver­gate, Marathon Dig­i­tal, Coin­base, and Riot Blockchain, have lost over half of their val­ue this year.

But Wall Street ana­lysts remain opti­mistic about the future of these com­pa­nies. About 20 ana­lysts still rec­om­mend Coin­base stocks as a buy despite its recent poor performance.

Accord­ing to an ana­lyst at BTIG, Mark Palmer, who has a price tar­get of $290 for Coinbase,

While we are not at all dis­mis­sive of the impact of the cur­rent cryp­to mar­ket down­turn, we also believe any notion that Coin­base would be unable to sur­vive this lat­est chal­lenge is mis­guid­ed in light of the facts on the ground.

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