Coinbase Global (NASDAQ:COIN) stock is dropping 5.1% in Monday premarket trading after Goldman Sachs analyst William Nance downgraded the cryptocurrency exchange's stock to Sell from Neutral on the expectation that its revenue decline will speed up in the second half of the year.
"We believe current crypto asset levels and trading volumes imply further degradation in COIN's revenue base, which we see falling ~61% Y/Y in 2022, and ~73% in the back half of the year," Nance wrote in a note to clients.
The job cuts that Coinbase (COIN) made earlier in June won't be enough, as they only bring its headcount back to Q1 2022-end levels and resulted in COIN moving to the low end of its previous expense guidance. "We believe COIN will need to make substantial reductions in its cost base in order to stem the resulting cash burn as retail trading activity dries up," Goetsch said.
In addition, he is more bearish on the competitive outlook and prospect for fee compression as the company merges its Coinbase (COIN) and Coinbase Pro platforms, which may make lower pricing more easily available to its users.
Note that in May, Seeking Alpha's Quant system, which has consistently outperformed the market, flagged Coinbase (COIN) for high risk of performing poorly, on negative EPS revisions and declining growth. By contrast, SA Authors' average rating is Hold, while the average Wall Street rating stands at Buy.
SA contributor Graham Neary also sees further downside for Coinbase (COIN), as the company still expects to operate at a loss for the foreseeable future. JR Research takes an opposing view and sees its May bottom holding.