Shares of Coinbase (NASDAQ:COIN) are up more than 9% in after-hours trade as the crypto exchange managed to cut losses and deliver better-than-expected revenues in Q1. While investors cheered COIN’s Q1 performance, Mizuho Securities analyst Dan Dolev remains unimpressed and sees a significant downside in COIN stock.
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COIN benefitted from higher spreads. The company said that the sequential improvement in its transaction revenue reflects higher realized pricing and an increase in volumes. However, Dolev sees this pricing benefit as unsustainable.
The analyst added that Coinbase’s Q1 reveals the company’s reliance on riskier revenue sources, including alt-coins and staking with an uncertain future. It’s worth highlighting that the U.S. SEC is cracking down on staking. Staking is a process in which the owner of the crypto assets volunteers to put their holdings on the blockchain to confirm transactions. In return, the owner gets rewarded.
COIN’s Q1 net revenues increased 22% year-over-year to $736.4 million, which surpassed the Street’s forecast of $655.3 million.
Dolev highlighted that about two-thirds of this increase in revenue was driven by riskier assets. The analyst said that the company earned higher interest income, which is temporary due to the declining USD Coin’s (USDC-USD) market cap. Moreover, higher staking revenue and alt-coin transaction revenue are also at risk due to the SEC’s crackdown.
Dolev rates COIN stock a Sell, while his price target of $27 implies 45.1% downside potential.
What’s the Prediction for COIN Stock?
COIN managed to cut losses in Q1. The company reported a net loss of $0.34 a share, significantly better than the Street’s loss estimate of $1.45 per share. However, the ongoing challenges keep analysts on the sidelines.
COIN stock sports a Hold consensus rating, reflecting seven Buys, eight Holds, and five Sells. Analysts’ average price target of $64.72 implies 31.49% upside potential.
