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Shares of Coinbase were falling after a bearish Wall Street report on Wednesday.
Dreamstime
Coinbase
stock can’t seem to find a bottom.
Shares were down 3.6% around $119 midday Wednesday, after slumping more than 5% earlier in the session. The stock has crumbled roughly 53% year to date.
The stock may be reacting to a bearish report from Mizuho Securities analyst Dan Dolev, who cut his price target and forecasts. Consensus estimates don’t reflect a steep drop in trading volume in April and May, according to Dolev. He sees “potential downside” to second-quarter revenue forecasts, writing that a “crypto winter” has settled while the “consensus is still wearing shorts.”
Dolev maintained a Neutral rating on
Coinbase
Global shares (ticker: COIN) but cut his price target to $135 from $150. He lowered his estimates for full-year 2022 revenue to $5.6 billion from $6.7 billion, and trimmed his forecast for Ebitda (earnings before interest, taxes, depreciation, and amortization) to $1.2 billion from $1.3 billion.
First-quarter trading volume is likely to come in at $300 billion, 45% below highs in the fourth quarter of 2021, the analyst notes. April and May trading volume have also been weak, implying 25% to 30% downside to second-quarter forecasts, he said. Dolev sees second-quarter revenue coming in at $1.14 billion, well below consensus at $1.5 billion.
Analysts have been steadily cutting estimates on Coinbase, reflecting many issues: ongoing weakness in crypto prices; rising expenses at Coinbase as it builds out new products and services; and pressure on profit margins as rival exchanges try to win over retail crypto traders.
The company has previously acknowledged some of the pressures it faces.
“We’re facing a lot of uncertainty at this point in time,” Coinbase CFO Alesia Haas said in March at an investing conference. “We are also then facing the headwinds of macroeconomic uncertainty,” she added, noting that crypto and Coinbase “are still in a risk category.”
However, at that conference, CEO Brian Armstrong also said “this is going to be a pretty big investment year for the company,” noting that the company aims to hire 6,000 people.12:09
Wall Street’s consensus target on the stock has drifted down from $394 at the end of 2021 to $278 now, according to FactSet. Estimates for first-quarter sales have slumped too, to $1.5 billion from $1.75 billion at the start of 2022.
Analysts now expect Coinbase to produce $352 million of Ebitda in the first quarter, down from $713 million at the start of the year.
With the stock down more than 50% this year, it would appear that investors are already bracing for an ugly first quarter report and forecast. The negative sentiment is running so deep that it could prime the stock for a “short squeeze”—whereby bearish traders are forced to buy shares to cover their positions, causing the stock to pop.
A catalyst for a squeeze would be Coinbase topping consensus estimates and issuing a more upbeat forecast. Dolev, for one, thinks that’s unlikely. We’ll know more next week, when Coinbase is scheduled to report earnings on May 10.
Write to Daren Fonda at daren.fonda@barrons.com