Coinbase Stock Falls as BOFA Downgrade to Underperform on Q4 Crypto Volume

Coinbase Stock

Coinbase Stock (NASDAQ:COIN)

After a research analyst at Bank of America named Jason Kupferberg downgraded the cryptocurrency exchange Coinbase Global (NASDAQ:COIN) to Underperform from Neutral, Coinbase stock fell 3.8% in premarket trading on Wednesday. Kupferberg cited waning crypto transaction volume in Q4 as the market downturn continues.

The pessimistic coverage came in the wake of Coinbase’s (NASDAQ:COIN) most recent round of job cutbacks, which took place on Tuesday. The company eliminated 25% of its workforce to navigate the extended bear market. In response, the firm said that its primary operational metrics would align with its projection for 2022 and that it anticipates a quarterly decrease in operating expenditures of around 25% in Quarter 1.

Kupferberg, citing statistics from CoinGecko, stated in a note that the trading platform’s volumes for December were less than half of its Q1-Q3 monthly average of roughly $76 billion. This was the first whole month after competitor FTX (FTT-USD) crashed.

Kupferberg is projecting only $49B/month, which aligns with Coinbase’s (NASDAQ:COIN) average for the latter half of 2022. While the mainstream estimates a $67B monthly run-rate for 2023, Kupferberg forecasts $49B/month.

He highlighted that “with increased regulatory uncertainty and consumer confidence shattered due to FTX, we expect retail crypto market participation will remain lukewarm in 2023 and notice that COIN’s retail take-rates are 90x those of institutional.” COIN’s retail take rates are much higher than institutional take rates.

The Underperform rating is consistent with the Strong Sell recommendation generated by the Quant system on Coinbase stock. Still, it contrasts the Hold rating generated by the typical Wall Street analyst.

CashFlow Hunter, who contributes to Seeking Alpha, rated COIN as a Strong Sell and argued that the firm might still be EBTDA negative based on recent sales patterns. COIN stock was labeled as a Strong Sell by CashFlow Hunter.

Featured Image: Unsplash @ Kelly Sikkema

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