Coinbase (COIN) shares experienced a notable increase of over 4% on Thursday, despite facing a double downgrade from H.C. Wainwright. Analyst Mike Colonnese revised his assessment of the cryptocurrency exchange from “buy” to “sell,” citing concerns about potentially disappointing second-quarter results due to declining spot trading volumes.
Colonnese expressed his view in a client note, stating that while Coinbase remains one of the leading platforms in the crypto industry, he believes that its recent valuation has exceeded expected near-term fundamentals following an impressive 150% rise since April. This surge, he noted, might be overextended, considering the anticipated decline in trading volume which could adversely affect Coinbase’s transaction revenues, the primary source of its income. However, he pointed out that revenues from subscriptions and services, such as staking and custody, could outperform expectations.
Despite this bearish outlook from H.C. Wainwright, other firms like Barclays maintain a neutral rating, expecting a weak second quarter, while Oppenheimer holds a more positive perspective with an outperform designation on the stock.
The increase in COIN shares on Thursday can largely be attributed to the ongoing rally in the cryptocurrency market, illustrated by Bitcoin’s jump of approximately 2%, reaching a new high above $113,000. This bullish trend in the crypto sector provides a glimmer of hope for investors, indicating a broader resilience and potential recovery despite specific setbacks faced by Coinbase.
As the market continues to evolve, the overall optimism in cryptocurrencies may counterbalance the challenges attributed to trading activity, suggesting that Coinbase could still benefit from the sector’s growth in the long term.