Coinbase stock soared during the Bitcoins rally. Watch for more issues.

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Coinbase stock has been battered amid the Bitcoin price bear market over the past year. Tiffany Hagler-Geard/Bloomberg

Coinbase Global stock has been in tears amid jubilation over higher cryptocurrency prices. But optimism can’t fix fundamentals, and analysts at Mizuho are worried about a continued slowdown in core crypto brokerage activity.

While shares of Coinbase (ticker: COIN) were down 2% late Tuesday morning, the stock is up more than 60% since early January. The main reason has been a rise in the price of Bitcoin, as Coinbase and other stocks often move in tandem with this industry barometer.

Yet Coinbase’s stock is down more than 70% in the past year. The prolonged slump in crypto prices in recent years has sent retail traders who form brokers’ core customer base to the hills. Bitcoin isn’t all that fun when you’re not making money, so the trading volumes that Coinbase relies heavily on to generate revenue through collecting transaction fees have dried up.

Recent share price gains are no reason to believe that the current crypto winter, which saw Coinbase telegraph a full-year loss of $500 million in 2022, is heating up.

Retail is the bread and butter of Coinbases, Mizuho analysts led by Dan Dolev wrote in a Tuesday note. Revenue from retail transactions made up more than 80% of the company’s total sales in 2021, they said.

Our proprietary Mizuho survey suggests that despite January’s Bitcoin rally, retail investors continue to shy away from crypto, Dolev said. Our survey, coupled with disappointing market share data and potential signs of pressure on catch rates in Q4, may mean more headwinds are brewing for 2023 earnings.

Mizuho reiterated its underperforming rating on Coinbase with a share price target of $30. Shares opened Tuesday at $54.20.

The Dolevs team detailed a survey of over 170 Coinbase retail customers which indicated that many likely avoided crypto despite this month’s rally. The majority of traders, around 90%, have remained inactive in December and so far in January. Additionally, among customers who said they traded crypto on Coinbase in December, around a third did not resume trading in January despite Bitcoin’s rally.

Coinbase did not immediately respond to a request for comment.

Mizuho is more pessimistic than others on Wall Street. Among 25 analysts surveyed by FactSet, Coinbase has an average rating of Hold. The average target price is above $61, implying a potential upside of more than 10% from current levels.

Write to Jack Denton at [email protected]

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