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

Goldman Sachs analysts expect lower cryptocurrency trading volumes will drag Coinbase revenues down more than 60% this year


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key takeaways

  • 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 layoffs thus far only bring its headcount back to where the company 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 downward 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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