Coinbase down 83% in the year so far: Check what analysts have to say
Coinbase, a cryptocurrency exchange platform, has fallen nearly 83% in 2022 and has been one of the biggest wealth destroyers for investors. In the last month, Coinbase shares have fallen 38%, and there are many reasons for the fall. Let us look at what is happening with Coinbase shares and what analysts are saying about the same.
Coinbase share price: Year To Date
Reasons for Coinbase stock price decline
Poor quarterly results: The stock has been under selling pressure throughout the year because of underwhelming quarterly results and concerns about potential margin degradation. To increase the margins, the company has undertaken multiple rounds of layoffs, and in the latest round, the company laid off 60 employees.
FTX collapse: The shares have fallen in recent weeks because of the FTX collapse which is impacting the broader crypto market. Though the company is not directly impacted because of the FTX collapse. The CEO recently said that Coinbase does not have any material exposure to FTX. Moreover, the CEO reiterated that since it is a listed company, its financials are public and open to scrutiny. Notably, in a tweet yesterday, the CEO shared that the company held Bitcoin worth $39.9 billion in its balance sheet which acted as reserves.
As per experts, the Coinbase fall can be explained with the crypto-contagion thesis - a fall in one company will cause a ripple effect and impact the whole industry.
Fall in crypto prices: The Fed's aggressive rate hikes have weighed on markets, and cryptocurrency has also taken a hit to some extent. Two of the biggest tokens - Bitcoin and Ether are trading at multi year lows, with a major fall in the last year. The equity market has recovered a bit, but cryptos have failed to change direction. Some of the crypto prices are tumbling to a multiyear low. For example, Solana, a coin backed by FTX, has lost over two-thirds of its value in two weeks.
Rating Downgrade: On Monday, Moody’s placed Coinbase’s corporate family rating for a downgrade. Coinbase’s current rating as per Moody’s is Ba3, one notch below Moody's junk rating of Baa3.
Coinbase shares: Brokerage radar
In the last week or two, analysts' from two major firms have given bearish notes on Coinbase. Analysts from Bank of America have reduced the target price from $77 per share to $50 per share and slashed the rating from BUY to NEUTRAL. It said that there are three reasons for the reduced target:
- dampened trading activity thanks to weaker confidence in crypto
- delayed regulatory clarity
- the possibility that contagion leads to an even wider fallout for the industry.
Also, Goldman Sachs has maintained a SELL rating and has reduced the target price to $41 per share.
This is not an investment advisory. The blog is for information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance, and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs. The performance and returns of any investment portfolio can neither be predicted nor guaranteed.
How much has Coinbase lost in the market cap?
The company launched its IPO 19 months back at a valuation of $85 billion. Currently, the valuation has fallen below $10 billion.
Is Coinbase profitable?
Coinbase reported a net loss of $1.1 billion for the June quarter.