Piper Sandler is reaffirming its bullish outlook on Coinbase even amid chaos in the cryptocurrency space given the fallout at FTX. “We believe COIN has a very strong cash position and may even capitalize on the FTX bankruptcy upheaval over the long term,” analyst Richard Repetto wrote in a Friday note. The firm reiterated its overweight rating and $100 price target on shares of the crypto exchange. The price target implies that Coinbase could surge 120% from where it currently trades. The stock has plunged more than 80% year to date. Still, even though Piper Sandler thinks Coinbase will outperform, it does see the need for more aggressive headcount reduction going forward to manage expenses and sustain shareholder value if an extended “crypto winter” results from the FTX fallout. Headcount trim The company has a much larger headcount than competitors such as Robinhood. “At YE2021, COIN reported a headcount of 3,730 — not far off from eBroker peer Robinhood (HOOD) which reported ~3,800 employees at YE2021,” said Repetto. “However, despite an 18% (1,100 employee) reduction in force (RIF) in June, COIN’s headcount has still increased ~26% YTD to 4,706 (at 3Q22 end) due to aggressive intra-quarter hiring in 2Q22.” He also noted that earlier in the year, Robinhood aggressively lowered its employee headcount by 37% to about 2,400, which is about half of Coinbase’s employee roster. Coinbase is on track to meet its goal of an adjusted earnings loss of less than $500 million for the full year 2022. On the other hand, Robinhood reached profitability sooner than expected because of aggressive cost cutting, which Coinbase may want to consider, Repetto noted. “COIN has argued that its elevated adjusted EBITDA “profitability” in 2021 warrants more tolerance of the losses experienced in 2022,” he said. “However, with the FTX bankruptcy driving incremental crypto headwinds, we believe cost reductions to be a more viable & perhaps more appropriate strategy.” Crypto winter contingency Still, signals point to the current crypto winter being near an ending point that could help boost Coinbase. “Using history as a guide and ignoring macroeconomic (interest rates), regulatory, geopolitical factors, we could be near a bottom in this crypto winter,” said Repetto. “And while the impact on crypto prices from potential bankruptcy liquidations (e.g. FTX, blockfi, etc.) could weigh on investor sentiment and adoption curves for some time, the potential for a near-term FED pivot could send crypto prices higher (i.e. risk on asset rally) which would likely be a positive for COIN’s trading volumes,” he added. And, if the crypto winter is not over soon, Piper Sandler noted that Coinbase CFO Alesia Haas said the company has contingency plans in place to weather the storm.
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