Coinbase shares are rising on predictions that it will survive the crypto winter

CoinbasCOIN
e’s hard-hit stocks rose slightly this morning after DA Davidson analyst Christopher Brendler issued a cautiously optimistic note describing the country’s largest crypto-trading firm as “ready for winter.” From the early afternoon, COIN traded at $ 53.65, up 5%, while NASDAQNDAQ
was flat. After listing publicly in April last year, the stock rose as high as $ 368 and reached a low of $ 46 on June 12.

As cryptocurrencies have fallen, so has Coinbase’s trading volume. In the second quarter of 2022, this volume fell 31% from the first quarter, and took a large chunk of the company’s primary revenue stream. As a result, Brendler dropped its price target for Coinbase shares over the next year from $ 135 to $ 90, but he ultimately sees the market downturn opening up acquisition opportunities for well-funded players in the crypto area such as Coinbase. When asked about potential goals, Brendler suggested that Coinbase’s goal could be international expansion.

“Either new products or new geographies. ‘They have really been quite loud about the desire to expand internationally,’ ‘Brendler said Forbes. “It can be expensive because when it comes to new regulatory conditions, new banking services, financial regimes that you are dealing with, it may make sense in certain geographies to make an acquisition or two to smooth out that process and scale up even more. faster. ”

Coinbase currently has $ 6.1 billion in cash on hand, but to survive declining revenues, it has been necessary to cut operating costs. In June, Coinbase joined a myriad of other fintechs in a round of layoffs, reducing the workforce by 18%. In addition, the company has $ 3.4 billion in long-term debt and has not yet shown consistent profitability. One concern for the company is that 90% of the revenue comes from the flagship trading business, which is linked to the volatile crypto market. BitcoinBTC
, the most valuable cryptocurrency, is down 59% so far this year. Coinbase’s efforts to diversify revenue streams have included an NFT marketplace, an investment business and a lending product that was wound up after a battle with the SEC.

“It’s definitely a bearish story out there if you look at their profitability and their financial situation, they are not debt free, something we are worried about these days, and they are not going to be profitable this year, most likely, given what’s going on with cryptocurrencies and a lot of their revenue is directly related to crypto trading, so it’s going to be difficult for them to make money this year, but they have a lot of flexibility, “said Brendler.” They still have this amazing franchise and brand. and the fact that they have to step down a bit, that may not be the best news, but ultimately I know that they are not going to be in a situation where they are struggling to survive, as other peers are going to be. if the winter gets worse. They’ve been through it before, and I’m sure they will do it again. “

Despite Coinbase’s brand and popularity among retailers, COIN is down 79% so far this year.