Wall Street is overestimating Coinbase ‘s ability to weather a tough crypto environment, according to Bank of America. The company’s shares dipped 4% in the premarket after analyst Jason Kupferberg downgraded the crypto exchange to underperform from neutral, citing the volatile environment for crypto assets. He also highlighted concerns over whether the stock can handle a substantial downward revision to consensus expectations. “While it is encouraging that COIN is remaining nimble on expenses while navigating its first crypto winter as a public company and seeking to preserve balance sheet liquidity … we think consensus revs for ’23 could be way too high,” Kupferberg wrote Wednesday. Coinbase sold off sharply in 2022, cratering 86% as crypto assets took a hit and once industry giant FTX imploded and filed for bankruptcy. In an effort to trim costs, Coinbase announced a second round of layoffs Tuesday slated to impact 20% of its workforce, or roughly 950 jobs. Kupferberg trimmed his 2023 revenue estimates and adjusted the bank’s price target on shares of Coinbase to $35 from $50 a share, implying 19% downside from Tuesday’s close. He noted expectations for lower crypto participation in the months ahead as the industry faces more regulation and overcomes its confidence blow. He also expects potentially lower retail transaction volumes going forward. He citied recent CoinGecko data, which showed Coinbase’s December volume hitting $34 billion. That’s less than half of the company’s monthly average of $76 billion during the first three quarters of the year. “We have been observing increasing signs of revenue diversification beyond retail crypto trading, a trend we think could accelerate in 2023 and beyond,” Kupferberg wrote. “That said, recent events in the crypto ecosystem have likely damaged user trust and caught the eye of regulators, which we expect to be meaningful headwinds in the near/medium-term.” — CNBC’s Michael Bloom contributed reporting
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