This week has turned into a bit of a disaster for Coinbase (NASDAQ:COIN). After getting pulled down in Monday’s session when news broke that the Securities and Exchange Commission (SEC) was suing rival cryptocurrency exchange Binance, the shares got hammered in Tuesday’s trading after the SEC turned its ire on Coinbase, alleging the US’s leading crypto exchange was functioning as an unregistered exchange and broker and that many of the tokens it has listed (e.g. SOL, ADA, MATIC, FIL, SAND, AXS and CHZ) are, in fact, securities.
Given Coinbase was handed a Wells Notice in March, the lawsuit comes as little surprise to Oppenheimer analyst Owen Lau.
“While we believe that regulatory headwinds will linger, which adversely impacts the sentiment near term, it appears that the back-to-back big sell-off is overdone,” Lau explained. “In our view, Coinbase will fight this lawsuit in court, which will likely be a long battle. The uncertainty of long-term revenue has increased, but near-term revenue impact could be immaterial.”
Lau reckons more than 50% of Coinbase’s revenue could ultimately be at risk, although he thinks the likelihood of losing all “could be low at this point.”
Possibly more importantly, is the “indirect impact.” Under the threat of enforced “aggressive regulations,” the company could lose revenue due to the damage to its reputation. “That said,” Lau went on to add, “Coinbase will likely continue its normal day-to-day operations, and we don’t anticipate material revenue impact near term.”
The problem right now is not only one concerning Coinbase but the entire US blockchain industry, that is the current lack of regulatory clarity. And until that is resolved, without clear regulation that can “foster innovation,” the US is at risk of losing ground to other jurisdictions in its blockchain development endeavors. “We believe the House is working diligently to provide clarity,” Lau reassuringly said, “in the meantime the court will play a crucial role to provide precedence, guidance and commentary to set the tone forward.”
For now, Lau remains on the COIN fence with a Perform (i.e., Neutral) rating and no fixed price target in mind. (To watch Lau’s track record, click here)
What does the rest of the Street thinks lies in store for COIN? The stock claims a Hold consensus rating, based on 8 Buys, 8 Holds and 7 Sells. Over the course of the year, given the $59.75 average target, the analysts see shares climbing ~12%. (See Coinbase stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
