By Senad Karaahmetovic
JPMorgan analyst Kenneth B. Worthington downgraded shares of Coinbase Global (NASDAQ:COIN) to Neutral from Overweight.
The price target is cut by 60% to $68.00 as the analyst predicts the slide in cryptocurrency prices and robust investments will likely weigh on profits “for some time.”
“While we continue to be believers in the cryptocurrency markets and blockchain technology, the extreme decline in the price of cryptocurrency markets in 2Q22 combined with Coinbase’s ramp in investment would appear to not only make it challenging for it to generate a profit in the near future but also to meet its annual loss cap of $500mn of annual EBITDA,” Worthington told clients in a note.
Despite a big cut to the price target, the analyst still sees “the potential for more downside to the shares should cryptocurrency markets not stabilize and should management not announce more definite steps to reducing the cost base.”
Worthington projects that crypto volumes at Coinbase are down over 30% in Q2 after falling as much as 40% in Q1.
“Ameritrade data from 1999-2006 suggests a recovery in activity levels could take many years.”
Moreover, the analyst also notes that FTX has overtaken Coinbase in terms of crypto-activity levels in May with similar trends also observed in June.
Coinbase stock is down 5.3% in pre-open Tuesday.