Sell ​​crypto platform Coinbase ahead of its earnings report, says Barclays

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Investors should dump Coinbase ahead of its earnings report, Barclays warned. Analyst Benjamin Budish downgraded the crypto platform to an equal weight underweight while raising its price target from $9 to $70. Despite the rise, its new target implies the stock could fall 18.6% next year from Wednesday’s close. Shares slid 1.3% before the bell on Thursday. The stock jumped over 140% in 2023, marking a comeback from the 2022 plunge, with investors watching crypto stocks closely. But Budish isn’t so sure the rally can sustain momentum. His argument: There is a rationale for stocks to trade at a higher price-earnings multiple, but the current rally is, in his words, overdone. COIN YTD mountain Coinbase, year-to-date There are “a few rays of sunshine, but it’s still winter,” he said in a note to clients on Thursday. “While we continue to believe that Coinbase is likely a longer-term winner in the broader crypto ecosystem, the fundamentals remain in question, and recent price action easing, rate hikes and cost rationalization probably don’t have much to do.” Second quarter trading volumes are expected to fall more than 30% from the first quarter despite a strong June compared to May and July year-to-date. And the increased regulation continues to weigh on the sector as competition increases, he added. Notably, Budish spoke to BlackRock’s Bitcoin ETF (which is expected to use Coinbase as its custodian and prime broker), saying Coinbase’s stock appreciation after the announcement does not fully reflect potential impacts on profits and losses that might not be fully seen for sometimes. Budish’s volume and revenue estimates are lower than the Wall Street consensus estimate, while interest revenue forecasts are higher than expected more broadly. Regarding future performance, he said Barclays had lowered its expectations for trading income, but noted that this may be offset by higher interest income as the futures curve rises. rate increases. Granted, Budish said the company still has some leeway for stocks to rise, but there’s little reason to expect a near-term rise without an increase in interest rates, activity USD Coin platform or market cap. Coinbase is expected to report its second quarter results next month, per FactSet. Barclays is not the only company to be bearish on Coinbase. On Wednesday, Atlantic Equities downgraded the stock to neutral, noting: “While the principles of our recent upgrade remain in place, the risk/reward ratio looks less attractive at this level given the persistent regulatory challenges ahead and the surprisingly low volume context.” CNBC’s Michael Bloom contributed to this report.

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