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Atlantic Equities analyst Simon Clinch downgraded shares of Coinbase Global (NASDAQ:COIN) to Neutral from Overweight with a $54.00 per share price target.
The move down reflects “incremental concerns over the company’s ability to attract talent longer-term, as well as competitive concerns regarding the spread of misinformation over the company’s financial strength and consumer asset protections,” Clinch explained to clients in a research note.
Moreover, the analyst is less and less optimistic about the prospects of stabilizing crypto prices and volumes.
“We note that recent cost actions suggest much more challenging fundamentals at Coinbase; volumes and crypto prices have failed to stabilise as hoped; risks of further crypto collapses are rising; crypto prices are testing or violating key support levels; macro is deteriorating at the same time as crypto prices for the first time; and the spread of misinformation may be having more than just a sentiment impact on Coinbase’s business,” Clinch added.
In the case of prolonged crypto winter, Coinbase could see its net revenue estimates fall more than 70% in FY23 and FY24. As of now, the analyst cut net revenue estimates by 10% in FY22 and then by more than 50% in FY23 and FY24 on prolonged crypto recovery.
“While the share price declines reflect some of this risk, we determine a further 37% downside potential in this scenario,” Clinch added, signaling a drop to around $35 per share in case fears over a severe crypto winter do materialize.
Coinbase stock is down a further 2% today to trade near Clinch’s new price target.
