Digital Assets: Goldman Sachs Downgrades Coinbase To Sell In Another Body Blow To Cryptos

June 28, 2022 | Digital Assets, Latest News, News
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Coinbase is now assigned a revised price target of $45 by Goldman.

Goldman Sachs (NYSE: GS) analysts, led by Will Nance, have downgraded Coinbase (NASDAQ: COIN) from a Neutral rating to Sell. The analysts said they were concerned about the relentless decline in the prices of crypto assets, as well as the falling levels of activity in their market. As a result, the analysts slashed their price target for COIN from $70 per share to $45. (Forbes)

Coinbase revenue base under siege

“We believe current crypto asset levels and trading volumes imply further degradation in Coinbase’s revenue base, which we see falling ~61% year-over-year in 2022, and ~73% in the back half of the year,” the analysts wrote.

They said the crypto firm needed to substantially reduce its cost base amidst a potential “crypto winter” to restrict its cash burn.

The analysts observed that Coinbase was faced with the hard choice between equity dilution and a reduction in employee compensations – the latter would, however, likely lead to a flight of talent.

Earlier this month, the crypto exchange, the largest in the US, announced an 18% cut in employee headcount, meaning about 1,100 people would lose their jobs.

“Our team has grown very quickly (>4x in the past 18 months) and our employee costs are too high to effectively manage this uncertain market,” CEO Brian Armstrong wrote to employees. “The actions we are taking today will allow us to more confidently manage through this period even if it is severely prolonged.”

Apart from Goldman Sachs, other rating companies/ investment bankers have also taken a knife to Coinbase’s ratings:

  • J.P. Morgan, earlier this month, downgraded the stock to “neutral” from “overweight”
  • Moody’s downgraded Coinbase’s Corporate Family Rating (CFR), the long-term rating that reflects the likelihood of default on corporate debt, from Ba2 to Ba3 and its guaranteed senior unsecured notes from Ba1 to Ba2 last week
  • Finance brokerage Redburn Partners downgraded Coinbase on Thursday from “buy” to “neutral”

As at the time of writing, Coinbase shares are trading at $52.92, down 5.47%.

Related Story: Coinbase To Axe 18% Jobs; Downgraded By JPMorgan

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