Coinbase’s badly battered stock rallied a bit this morning after D.A. Davidson analyst Christopher Brendler released a cautiously optimistic note describing the nation’s largest crypto trading firm as “ready for winter.'
... [+]e’s badly battered stock rallied a bit this morning after D.A. Davidson analyst Christopher Brendler released a cautiously optimistic note describing the nation’s largest crypto trading firm as “ready for winter.” As of early afternoon, COIN was trading at $53.65, up 5%, while the NASDAQwas flat. After listing publicly last April, the stock surged as high as $368 and hit a low of $46 on June 12.
As crypto prices have plummeted, so too has Coinbase’s trading volume. In the second quarter of 2022, that volume fell 31% from the first quarter, taking a big bite out of the company’s primary revenue stream. This led Brendler to drop his price target for Coinbase stock over the next year from $135 to $90, but he ultimately sees the market downturn as opening up acquisition opportunities for well-funded players in the crypto space such as Coinbase.
“Either new products or new geographies. They have really been pretty vocal about their desire to expand internationally,’’ Brendler told“That can be expensive because when you come to new regulatory relationships, new banking, financial regimes that you're dealing with, so it may make sense in certain geographies to make an acquisition or two to smooth that process and scale up even faster.”
Coinbase currently has $6.1 billion in cash on hand, but to survive falling revenue has needed to cut operating costs. In June, Coinbase joined a myriad of other fintechs in a round of lay-offs,. Additionally, the company has $3.4 billion in long term debt and has yet to show consistent profitability. One concern for the company is that 90% of revenue comes from its flagship trading business, which is tied to the volatile crypto market.
“There's certainly a bearish narrative out there where if you look at their profitability and their financial situation, they are not debt free, which is something we are concerned about these days and they're not going to be profitable this year, most likely, given what's happening to crypto volumes and a lot of their revenue is directly tied to crypto trading so it's going to be tough for them to profit this year, but they do have a lot of flexibility,” Brendler said.
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