Mizuho Cuts Crypto Exchange Coinbase to Underperform, Trims Price Target
The bank’s analysis shows that 2023 revenue estimates for the crypto exchange are overly optimistic.
Mizuho cut its rating on crypto exchange Coinbase's shares on Friday to underperform from neutral and lowered its price target to $30 from $42, saying it expects depressed crypto trading volume in 2023 and 2024 to result in lower revenue for the exchange.
The stock fell 2.8% to $41.60 in premarket trading.
In a research report, Mizuho also said that interest income from Circle’s USD coin (USDC) has become increasingly important for Coinbase, accounting for 10%-15% of third-quarter revenue, amid deteriorating sentiment and trading volumes.
Any potential changes to Coinbase’s USDC income from Circle could have an “amplified adverse effect on its profitability,” the report said.
Coinbase, which is a co-founder of USDC, on Friday waived off conversion fees for users who wish to switch to USDC from Tether's USDT.
Irrespective of interest income risks, the bank’s analysis shows that 2023 revenue estimates are likely overly optimistic.
Coinbase CEO Brian Armstrong said on Wednesday that the company’s revenue will be half or less what it was last year as the exchange struggles amid sharp drops in cryptocurrency prices and continuing ripple effects from multiple bankruptcies this year, including the recent collapse of rival exchange FTX.
The company's shares have fallen over 80% this year, and the stock has been one of the worst performers on the Nasdaq index.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.