Coinbase Stock Falls More as Wells Notification Triggers Another Analyst Downgrade

Coinbase Stock

Coinbase Stock (NASDAQ:COIN)

With a downgrade to Underperform from Outperform by Cowen, shares of cryptocurrency exchange Coinbase (NASDAQ:COIN) dropped another 3.2% in premarket trading on Friday. This follows a 14.1% drop in the previous session.

Coinbase reported receiving a notice from SEC staff recommending enforcement action against the business for suspected violations of securities laws on Wednesday evening. As a result, COIN dropped substantially on Thursday, prompting a downgrading of Coinbase stock from Outperform to Perform by Oppenheimer.

In a blog post dated March 22, Coinbase said it is “confident in the legality of our assets and services, and if needed, we welcome a legal process to provide the clarity we have been advocating for” in response to the Wells notice, which pertains to Coinbase’s listed digital assets as well as its staking service.

Yet, Cowen believes the corporation may be headed for litigation against the regulator, “which we anticipate generating an overhang on shares,” the firm noted in a note to investors.

In addition, Cowen cautioned that “to the extent listed crypto assets are designated securities, it might accelerate trading volume degradation” while arguing that COIN’s blockchain rewards income would be badly harmed should the firm be compelled to cease its staking operation.

The Underperform rating is at odds with the Quant system’s recommendation of Hold and the median recommendation of Wall Street analysts, both of which are Buy.

Although the crypto market has increased by about 50% since the end of 2022, JMP analyst Devin Ryan has maintained his Market Perform rating on COIN despite the improved operational environment this year.

Given the company’s recent expenditures, he assured investors the business could continue functioning “until we proceed to a clearer regulatory route — which we remain confident will be the eventual result.”

COIN’s staking business was the company’s sole growing sector last year. Therefore Mike Fay, a SA writer, rated the Coinbase stock as a Hold because of the company’s likely legal fight with the SEC.

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