Analyst Downgrades Coinbase Amid Regulatory Challenges
It’s time to step to the sidelines on Coinbase after its recent rally, according to Atlantic Equities. Analyst Simon Clinch downgraded Coinbase to neutral, but raised his price target, following the crypto exchange operator’s run-up.
Reasons for the Downgrade
Clinch stated, “While the tenets of our recent upgrade remain in place, the risk/reward looks less attractive at this level given continued regulatory challenges ahead and the surprisingly weak volume backdrop.”
He further added, “We are raising our target price to $80, reflecting the impact of higher crypto prices, but downgrading the shares to Neutral given the limited upside.”
Potential Downside for Coinbase
The analyst’s price target represents a downside of about 10% for Coinbase shares from Tuesday’s closing price of $89.15. However, Coinbase was higher by 0.6% in premarket trading on Wednesday.
Concerns About Crypto Market
Despite Coinbase’s significant rally of over 150% this year, Clinch pointed out that cryptocurrency volumes are currently low, even as high prices buoy investor sentiment. He also highlighted the decline in the market cap for stablecoin USDC, which impacts Coinbase’s interest income line.
Considering these factors, Clinch expressed concern about the outlook for the rest of FY23, suggesting a potential near-term pullback in the shares.
