Barclays analyst Benjamin Budish upgraded Coinbase Global, Inc.
The analyst notes that the regulatory landscape is improving, with presidential candidates showing greater support for crypto and the approval of several spot crypto ETFs.
This favorable environment has helped Coinbase's revenues remain resilient. The analyst acknowledges ongoing risks for Coinbase, such as fee compression in retail and pressure on profitability from lower rates and USDC rewards.
However, the improving regulatory environment, enhanced profit and loss profile (especially on costs), steady diversification (including futures, base fees, custody revenues, and Coinbase One), and strong industry leadership in the U.S. suggest a more balanced risk/reward profile.
Despite recent share performance-down 35% while the S&P is up 3% over the past three months-the overall outlook appears more favorable, Budish adds.
Coinbase notably expanded its workforce to manage increased volumes but also raised its Technology, Development, and G&A expenditures.
The rapid rise in spending led to inefficiencies, as the over-hiring became evident when activity levels declined from their peak, the analyst adds.
The analyst adjusted the company's model to account for quarter-to-date trends, including lower crypto asset prices and a reduced fed funds futures curve.
This revision moderates near-term volume growth expectations, reflecting stable broader exchange volumes and modest anticipated growth, Budish adds.
The analyst lowered the FY24 adjusted EPS estimate to $6.91 from $7.15. For FY25, the analyst decreased adjusted EPS estimate from $6.26 to $5.11.
Price Action: COIN shares are trading lower by 7.4% to $147.85 at last check Friday.
