Goldman Sachs says Coinbase may need to sack more workers; downgrades its stock rating to sell
LeadÂing investÂment bank GoldÂman Sachs has downÂgradÂed Coinbase’s stock ratÂing to sell from neuÂtral and reduced its price tarÂget from $70 to $45 in its latÂest note, CNBC reportÂed June 27.
The downÂgrade was caused by the bear marÂket, leadÂing to crypÂto-assets valÂue plumÂmetÂing to new lows. CoinÂbase stock saw a 5.7% drop to $59.40 in preÂmarÂket tradÂing after the report.
Coinbase’s revÂenue is depenÂdent on the transÂacÂtion fees it charges its retail users.
But with the tradÂing activÂiÂty of this group declinÂing masÂsiveÂly due to risÂing inflaÂtion and the crypÂto marÂket downÂturn, GoldÂman Sachs preÂdicts that the exchange revÂenue could be cut by as much as 61%.
This would be a heavy blow for CoinÂbase as it reportÂed heavy lossÂes in the secÂond quarÂter of 2022.
Coinbase may need to sack more workers
The BriÂan ArmÂstrong-led exchange has been tryÂing to cut costs and recentÂly laid off 18% of its workÂforce, citÂing declinÂing revÂenue and curÂrent marÂket conditions.
MeanÂwhile, its effort to diverÂsiÂfy its revÂenue has not been entireÂly sucÂcessÂful. Its recentÂly launched non-funÂgiÂble token marÂketÂplace has seen litÂtle sales since its launch.
AccordÂing to GoldÂman Sachs, CoinÂbase will need to reduce its expenÂdiÂture to stem the resultÂing cash burn. It added that the comÂpaÂny would have to decide between dilutÂing its shareÂholdÂers or reducÂing employÂee comÂpenÂsaÂtion to stay afloat.
Other crypto stocks are at risk too
CoinÂbase stock is not the only crypÂto-relatÂed stock curÂrentÂly facÂing headÂwinds. AccordÂing to Bloomberg, most pubÂlicly tradÂed crypÂto-relatÂed comÂpaÂnies have seen masÂsive declines in their stock value.
Almost all pubÂlicly tradÂed crypÂto-exposed comÂpaÂnies, like MicrosÂtratÂeÂgy, SilÂverÂgate, Marathon DigÂiÂtal, CoinÂbase, and Riot Blockchain, have lost over half of their valÂue this year.
But Wall Street anaÂlysts remain optiÂmistic about the future of these comÂpaÂnies. About 20 anaÂlysts still recÂomÂmend CoinÂbase stocks as a buy despite its recent poor performance.
AccordÂing to an anaÂlyst at BTIG, Mark Palmer, who has a price tarÂget of $290 for Coinbase,
While we are not at all disÂmisÂsive of the impact of the curÂrent crypÂto marÂket downÂturn, we also believe any notion that CoinÂbase would be unable to surÂvive this latÂest chalÂlenge is misÂguidÂed in light of the facts on the ground.