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Coinbase stock has been battered amid the bear market in Bitcoin prices over the past year.
Tiffany Hagler-Geard/Bloomberg
Coinbase Global
stock has been on a tear amid jubilation about higher prices for cryptocurrencies. But optimism can’t fix fundamentals, and analysts at
Mizuho
are raising concerns about a continued slowdown in the crypto broker’s core business.
While shares in Coinbase (ticker: COIN) were down 2% by late morning Tuesday, the stock has soared more than 60% since the beginning of January. The main reason has been a rally in the price of Bitcoin, given that Coinbase and other stocks often move in tandem with that bellwether of the industry.
Still, Coinbase stock is down more than 70% over the past year. Last year’s prolonged crash in crypto prices has sent the retail traders who form the broker’s core customer base heading for the hills.
Bitcoin
isn’t so fun when you’re not making money hand over fist, so trading volumes—which Coinbase leans on heavily for revenue through collecting fees on transactions—have dried up.
The recent gains in the stock price are no reason to believe the current “crypto winter”—which has seen Coinbase telegraph a 2022 full-year loss of as much as $500 million—is getting any warmer.
“Retail trading is Coinbase’s bread and butter,” Mizuho analysts led by Dan Dolev wrote in a Tuesday note. Revenue from retail transactions accounted for 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,” said Dolev. “Our survey, coupled with disappointing market share data and potential signs of take rate pressure in 4Q, may all mean that more headwinds are brewing for 2023 revenue.”
Mizuho reiterated its Underperform rating on Coinbase with a price target on the stock of $30. The shares opened Tuesday at $54.20.
Dolev’s team detailed a survey of more than 170 Coinbase retail customers that indicated many have likely shied away from crypto despite the rally this month. The majority of traders—some 90%—remained inactive in December and so far in January. Moreover, of the customers that reported trading crypto on Coinbase in December, about one-third didn’t return to trade in January despite the Bitcoin rally.
Coinbase didn’t immediately respond to a request for comment.
Mizuho is more downbeat 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 gain of more than 10% from current levels.
Write to Jack Denton at jack.denton@barrons.com