Coinbase Global, Inc (NASDAQ:COIN) shares are trading lower Wednesday after Piper Sandler analyst Patrick Moley downgraded the stock from Overweight to Neutral and lowered its price target from $65 to $60.
The re-rating reflects the valuation and a belief that the recent case brought forth by the SEC, and the continued lack of regulatory clarity in the U.S., have created too much uncertainty to project revenues in future years prudently.
COIN shares are up 126% year-to-date and 55% since June 6, when the SEC accused COIN of operating an unregistered securities exchange.
Moley believes the appreciation reflects rising crypto prices and several large asset managers filing for spot Bitcoin ETFs (some of which have named COIN as custodian).
However, rising crypto prices have not translated to increased trading volumes for COIN in recent quarters, and the timing of a spot bitcoin ETF approval is anyone’s guess.
In 2Q23, the analyst expects COIN to report its lowest quarterly trading volumes and monthly transacting user totals in over two years. Bottomline, while he continues to believe COIN is positioned to be a significant player in regulatory clarity in the U.S., he would like to see more progress on the regulatory front and a convincing turnaround in the underlying fundamentals of the business before becoming more optimistic on COIN.
The price target cut continues to represent ~4x his FY24 revenue estimate.
Despite equity volatility metrics reaching the lowest quarterly levels since before the pandemic, the analyst expects all four U.S. exchanges to report record second-quarter revenues as trading volumes remained strong in the face of seasonal headwinds.
Fixed income trading firms’ 2Q23 results were likely negatively impacted by the fallout from the mid-March bank crisis and U.S. debt ceiling negotiations as YoY growth of U.S. credit volumes slowed to just +1% in 2Q23 from +15% in 1Q23.
eBroker results will likely vary again as Interactive Brokers Group, Inc (NASDAQ:IBKR) and Robinhood Markets, Inc (NASDAQ: HOOD) continue to benefit from higher rates and Charles Schwab Corp (NYSE: SCHW) continues dealing with the knock-on effects of client cash sorting (although it appears sorting has slowed significantly).
Price Action: COIN shares traded lower by 1.60% at $78.65 on the last check Wednesday.
