Shares of Coinbase Global (COIN), the largest cryptocurrency exchange in the U.S., plunged more than 20% on Wednesday morning to approximately $56 after the company reported its first quarterly loss amidst declines in revenue and trading volume.
Amid the chaos, several investment firms cut their price target on Coinbase’s stock this morning but maintained their ‘buy’ ratings and expressed confidence in the company’s long-term success.
“While COIN’s weaker-than-expected 1Q22 report reflects a challenging crypto market, fears driving stock price decline appear greatly overblown in light of liquidity and long-term growth prospects,” wrote BTIG Research analysts in today’s note.
They believe the market’s pricing of COIN “fails to reflect the company’s ample liquid assets”, including $6.1 billion of cash and equivalents and approximately $1 billion in crypto, and its multiple avenues for growth, including Coinbase’s recently launched NFT marketplace and the potential upside from its staking offering.
Investment bank Oppenheimer echoed the sentiment, noting that Coinbase has a strong balance sheet, enabling it to weather the macro challenges, and continues to diversify, “which makes COIN an attractive long-term investment.”
San Francisco-based JMP Securities also remains bullish but cautions: “expect another soft quarter in 2Q (likely even more so than 1Q) as the backdrop remains challenging.”
In a notable exception, Goldman Sachs downgraded the stock from ‘buy’ to ‘neutral’, saying “COIN is unlikely to return to recent levels of profitability in the near term absent a significant increase in crypto prices or volatility.” The bank has lowered its 12-month target for the company’s shares to $80 (from $240).
According to the earnings report, Coinbase’s first-quarter revenue slumped to $1.17 billion, below Wall Street’s expectations of $1.48 billion. The exchange’s total trading volume shrank from $547 billion in the fourth quarter of 2021 to $309 billion. Coinbase said its first-quarter net loss was $430 million. The number of monthly transacting users also fell to 9.2 million, a decrease of 2.2 million from Q4.
The earnings release came amid a broader sell-off in the technology and cryptocurrency sectors. The largest digital asset by market capitalization, bitcoin, is trading in the $30,000-31,000 range, at less than half of its peak price of $68,721. Crypto’s market cap currently sits at a multi-month low of $1.38 trillion. Fears are fueled by what appears to be a bank run on TerraUSD (UST), the so-called algorithmic stablecoin, and its sister token LUNA. The latter acts as a stabilizing mechanism for UST to maintain its 1:1 peg to the dollar.