Shares of crypto exchange Coinbase Global (NASDAQ:COIN) have rallied 162% so far this year due to the solid rebound in Bitcoin (BTC-USD) and the optimism around the potential launch of a Spot Bitcoin ETF. However, several analysts are cautious about the stock due to persistent losses, regulatory concerns, and declining trading volumes.
Earlier this month, Coinbase reported better-than-anticipated revenue and lower-than-expected loss per share for the third quarter of 2023. The crypto exchange’s top line increased 14.2% year-over-year to $674.1 million. Moreover, the company’s net loss per share narrowed to $0.01 from $2.43 in the prior-year quarter. The third-quarter revenue grew as the weakness in transaction revenue due to lower trading volume was more than offset by higher Stablecoin revenue.
However, investors were concerned about the 52% year-over-year and 17% sequential decline in trading volume to $76 billion in Q3 2023.
In a research note to investors on November 10, Mizuho Securities analyst Dan Dolev pointed out that while COIN’s trading volume decline has been well documented, it is worth noting that the company’s retail Monthly Transacting User (MTU) count has also fallen steadily. This has fueled a decline in trading volume per retail MTU to nearly $550 in Q3 2023, down from about $640 in Q2 2023 and an average of about $1,600 in 2022.
Dolev highlighted that this slump in retail engagement has occurred despite the rise in Bitcoin prices over the last several quarters, which is in contrast to a historical trend that saw users and volume per user grow during times when Bitcoin prices increased.
Dolev mentioned some near-term positives like higher spreads, stabilizing retail market share in Q3 compared to Robinhood (NASDAQ:HOOD), and cost controls. That said, he sees a significant downside in COIN stock from current levels “as lingering retail fatigue threatens COIN’s most attractive revenue stream over the longer-term.” Dolev raised the price target for COIN stock to $31 from $27 but reiterated a Sell rating.
On November 3, Piper Sandler analyst Patrick Moley reaffirmed a Hold rating on the stock in reaction to the Q3 2023 results. Moley said that he remains on the sidelines as he would prefer to see more progress on the regulatory front and a convincing turnaround in the underlying fundamentals of Coinbase Global’s business.
Is Coinbase a Good Stock to Buy?
Overall, Wall Street has a Hold consensus rating on Coinbase stock based on six Buys, six Holds, and seven Sells. The average price target of $87.76 implies a possible downside of 5.3%.
Coinbase stock has witnessed a robust year-to-date rally. However, many analysts are skeptical about the road ahead due to several headwinds, including falling trading volumes and regulatory pressures.