Shares of Coinbase (NASDAQ:COIN) fell 1% in pre-open trading Thursday after another Wall Street firm cut its rating on the crypto exchange following a massive rally in the stock. This marks the third downgrade since last week, with shares up 143% year-to-date.
Barclays analysts cut their rating from Equal Weight to Underweight Thursday while lifting their price target to $70 from $61. The new price target suggests about 22% downside from yesterday's closing price.
"COIN has surprised on revenues and costs in the past few quarters, but with volumes and USDC market cap depressed, regulatory overhang likely to last for some time, and a significant recent run-up in shares, we see few near-term drivers, particularly from a fundamental perspective," the analysts said in a research report on Thursday.
In June, exchange volumes showed some improvement compared to May, with the rate of decline slowing down. However, overall volumes for Q2 were significantly worse than Q1, down 36% quarter-on-quarter, the analysts highlight. July metrics indicate a further decline similar to May levels. The decline in USDC market cap may be stabilizing, but a robust recovery timeframe remains uncertain. Regulatory overhang is expected to persist, while competition in the U.S. market is increasing as traditional financial-backed exchanges and other participants enter the space. Furthermore, the analysts note despite the significant appreciation of shares following the announcement of a BlackRock-sponsored spot Bitcoin ETF, it does not accurately reflect the potential future P&L impact for Coinbase as the expected custodian and prime broker.
For Q2, Barclays' volume and revenue estimates are 16% and 2% below consensus, respectively.
Barclays is not the only broker cutting the rating on Coinbase.
Yesterday, Atlantic Equities downgraded the stock from Overweight to Neutral with a price target of $80.00 (from $70.00) after the 60% rally from the lows. The analysts said the "risk/ reward looks less attractive at this level given continued regulatory challenges ahead and the surprisingly weak volume backdrop."
Last week, Piper Sandler downgraded shares from Overweight to Neutral with a price target of $60.00 (from $65.00). They note rising crypto prices "have not translated to increased trading volumes for COIN in recent quarters and the timing of a spot bitcoin ETF approval is anyone’s guess."