Shares of cryptocurrency exchange Coinbase Global (NASDAQ:COIN) have rallied more than 77% over the past month and 186% year-to-date, thanks to the favorable court ruling for Ripple Labs (the crypto firm behind XRP-USD token) and the growing interest of several crypto firms to launch a spot Bitcoin (BTC-USD) ETF. Ahead of the company’s second-quarter results scheduled to be announced on August 3, several Wall Street analysts seem cautious on the stock due to regulatory overhang and weak volumes.
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Analysts’ Opinions Ahead of COIN’s Q2 Earnings
In June, the SEC sued Coinbase for allegedly operating its crypto asset trading platform as an unregistered national securities exchange and broker. Coinbase is aggressively fighting the SEC’s allegations and seeking more clarity regarding the regulations for crypto firms.
However, a U.S. District Judge’s ruling that Ripple did not violate federal securities law by selling XRP on public exchanges is being seen as a favorable development for Coinbase. Nonetheless, several analysts remain wary of the regulator headwinds.
Last week, Barclays analyst Benjamin Budish downgraded Coinbase from Hold to Sell, citing regulatory overhang, the recent rally in the stock, and rising competition, with some TradFi-backed exchanges and other players entering the crypto sector. However, he raised his price target for COIN to $70 from $61.
Further, Budish pointed out that COIN’s Q2 volumes have declined 36% compared to the first quarter and July volumes are trending worse on a month-over-month basis. The analyst continues to see Coinbase as a “likely long-term winner” in the crypto space but thinks that fundamentals remain challenged.
Last week, Atlantic Equities analyst Simon Clinch also downgraded Coinbase stock to Hold from Buy but increased the price target to $80 from $70. Clinch believes that risk-reward seems less attractive due to persistent regulatory issues and weak volumes.
On Wednesday, Compass Point analyst Chase White slightly lowered his Q2 revenue and adjusted EBITDA estimates for Coinbase to reflect subdued crypto spot trading volumes both for COIN and the market in general. Allen highlighted that the softness in the volumes is continuing in the third quarter.
Allen said that he will be observing how Coinbase has fared against its Q2 operating expenses guidance and the outlook for the third-quarter operating expenses, as he believes that investors will focus on how the company is containing expenses given the weak trading backdrop.
Nevertheless, Allen continues to be bullish on COIN, as he believes that it is well-positioned to win further market share in both the spot and derivatives space when trading volumes recover, given its “sterling reputation” and negative sentiment around rival Binance. He also expects COIN shares to benefit from the SEC vs. Ripple ruling. In line with his investment thesis, Allen raised his price target for COIN to $145 from $100 and reaffirmed a Buy rating.
Is Coinbase Stock a Buy, Sell, or Hold?
Wall Street is sidelined on COIN stock, with a Hold consensus rating based on seven Buys, eight Holds, and seven Sells. The average price target of $68.53 implies a possible downside of 32.3%.
