Coinbase shares ‘uninvestable in the near term,’ analyst says

Berenberg Capital Markets’ Mark Palmer cuts price target of company’s shares by 30% after SEC allegations

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As one analyst lowered his price target for Coinbase by nearly 30%, another described recent sell-offs of the crypto exchange’s shares as “overdone.”

Mark Palmer, an analyst at Berenberg Capital Markets, decreased his price target for Coinbase stock from $55 to $39.  

The stock’s price stood at roughly $54 on Thursday at 10:30 am ET, up about 1.5% on the day. The crypto exchange’s shares are down about 17% in the last five days, dropping below $47 on Tuesday after the SEC sued Coinbase for alleged securities violations. 

“The reduction in our price target reflects our view that COIN, which we had expected to report weak [second quarter] trading volumes before the SEC filed a lawsuit against it on Tuesday, could see that weakness persist and intensify due to the overhang that the lawsuit has created,” Palmer said.

He added: “The upshot is that we view COIN shares as uninvestable in the near term.”

The company’s trading volumes during this year’s first quarter were $145 billion — flat quarter over quarter, but significantly down from $309 billion during the first quarter of 2022.

The SEC’s allegations against the crypto exchange include operating as an unregistered exchange, broker and clearing agency, as well as listing tokens that the commission claims are securities.

Coinbase has denied that it lists securities. Chief Legal Officer Paul Grewal said in a Tuesday statement the company has “demonstrated commitment to compliance.”

“The SEC’s desired remedy would require the complete wind-down of COIN’s core businesses in the US,” Palmer wrote in a research note. “We believe the prospect of such a wind-down is likely to exacerbate the overhang on the company’s shares.”

Owen Lau, an executive director at Oppenheimer & Co., said in a Tuesday note that while the lawsuit wasn’t unexpected — after the SEC served Coinbase with a Wells notice in March — the price reaction was “a bit surprising.”

While half, or more, of Coinbase’s revenue could be at risk, he added, the Coinbase stock sell-offs on Monday — the day the SEC sued rival exchange Binance — and Tuesday appear to be “overdone.” 

“In our view, Coinbase will fight this lawsuit in court, which will likely be a long battle,” Lau wrote. “The uncertainty of long-term revenue has increased, but near-term revenue impact could be immaterial.” 

In a note on Tuesday, Morningstar Analyst Michael Miller wrote that he would not change his $80 fair value estimate for Coinbase in response to the SEC lawsuit news. However, he assigned a “very high uncertainty” rating to the company, pointing out that Coinbase is expected to remain in a state of “regulatory limbo for the foreseeable future.”

“While the SEC’s complaint was expected, this is still a material negative event for Coinbase, particularly given the breadth of the charges,” he said.


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