Coinbase stock has been on a roll. Moodys further downgraded its credit rating.

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Coinbase stock benefited from a recent rally in Bitcoin prices. Tiffany Hagler-Geard/Bloomberg

Shares of Coinbase Global have been on a roll, tearing higher amid a Bitcoin price rally. The same optimism has not trickled down to bonds, with Coinbase debt being downgraded by Moodys and the company’s bonds trading in junk territory.

While Coinbase (ticker: COIN) stock remains down over 70% over the past year, the cryptocurrency broker’s shares have risen over 55% over the past month and were on poised to make more gains on Monday. Helping the downed stock was a big jump in the price of Bitcoin, the primary crypto Coinbase often trades with, which soared more than 30% in two weeks.

The picture for Coinbases shares is improving, with a price target for the stock among analysts polled by FactSet implying even more upside of more than 10% from current levels, even after such an impressive rally. But the same cannot be said for Coinbase debt.

The company’s bonds maturing in 2026, 2028 and 2031 are all yielding more than 10%, firmly in junk bond territory. While the 2026 note has benefited from recent optimism, trading at its highest level since issuance, the same cannot be said for longer-dated bonds, which are trading at deep discounts that come from s deepen, prices sliding again last week.

The downgrade of credit rating agency Moodys, which followed its counterpart S&P Global in going darker on Coinbase, does not help the image.

Moodys downgraded the Coinbases family of companies’ rating to B2 from Ba3 last Thursday and downgraded its senior unsecured secured notes to B1 from Ba2, with a stable outlook. B2 and B1 ratings represent bonds considered speculative subject to high credit risk.

The rating action reflects Coinbases’ significantly weakened revenue and cash flow generating capacity due to the challenging conditions in the crypto asset operating environment, characterized by a sharp decline in crypto asset prices and a decline of client trading activity, Moodys analysts said.

Moodys expects Coinbase’s profitability to remain challenged despite its recent announcement of massive layoffs in a bid to cut costs, a move that was welcomed by Wall Street and eased worst-case scenario fears. .

But there is some upside to a stable outlook, which is driven by its currently healthy liquidity position which absorbs the continued cash flow drain the company is experiencing.

The stable outlook also reflects Coinbases’ cost management efforts and factors in additional cash flow benefits associated with the company’s growth in non-transactional revenue streams, Moodys analysts added.

While the disconnect remains between Coinbases debt and equity, unhelped by two major credit rating downgrades in the same number of weeks, the outlook may not be as bad as coin prices suggest. obligations. It may take a little longer for investors in Coinbases’ longer-term debt to regain optimism.

Write to Jack Denton at [email protected]

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