Coinbase Global Inc (NASDAQ:COIN) stock fell 1.69% (As on July 10, 11:15:55 AM UTC-4, Source: Google Finance) after Piper Sandler downgraded the company to Neutral from Overweight with a price target of $60, down from $65. The firm cites valuation and a belief that the recent case brought forth by the SEC, as well as the continued lack of regulatory clarity in the U.S., has created “too much uncertainty to prudently project revenues in future years.”
Most investors expect Coinbase to benefit significantly from its role as the chosen crypto exchange once the spot Bitcoin trading ETFs are approved by the SEC. However, there is no guarantee that the SEC shall approve any such ETF, and the timeline for such an approval is anyone’s guess. Coinbase said in a letter filed late on Wednesday in Manhattan federal court it would ask a judge to dismiss the SEC lawsuit, arguing the regulator does not have authority to pursue civil claims because the crypto assets trading on its platform are not “investment contracts” and thus not securities.
Piper Sandler analyst, Patrick Moley, downgraded the crypto exchange saying that the regulatory uncertainty has made it difficult to predict the firm’s revenues accurately. The analyst further stated that he expects second-quarter trading volumes and monthly transacting user totals to be the lowest in over two years. Moley is the second analyst to express concern about Coinbase’s future since last week, Berenberg warned that the stock’s steep rally in June could be short-lived after investors bought Coinbase shares following BlackRock Inc.’s application for a spot Bitcoin exchange-traded fund, naming the crypto exchange as a custodian. The legal tussle between Coinbase and the SEC will significantly impact prices going forward.
Meanwhile, since June 6, when the SEC accused the company of illegally operating an unregistered securities exchange, shares in Coinbase have soared 55% through Monday’s close. The stock has more than doubled this year, according to data compiled by Bloomberg. Piper Sandler’s Moley attributes the rally to a combination of rising crypto prices and the flood of filings for spot-Bitcoin ETFs.
Additionally, the company had posted a smaller-than-feared loss in the first quarter, benefiting from cost cuts and diversification of revenue sources. The company has benefited from its deal for One River Digital Asset Management to ramp up product offerings in subscription and services revenue, while it also launched wallet-as-a-service and other products to scale blockchain.