Coinbase Shares Plunge as Weak Earnings Prompt Near-Term Caution

Shares of Coinbase Global (COIN) tumbled more than 26% on Wednesday to less than $54 after the crypto exchange reported first quarter revenue below estimates and weaker trading volumes. The stock has lost more than 70% this year.

While several Wall Street analysts see Coinbase as a leader across the broader crypto industry, they say headwinds remain in place, and many lowered their price targets early Wednesday. And Goldman Sachs downgraded Coinbase to neutral from buy, reducing its price target from $240 to $80. Goldman analyst Will Nance said Coinbase is still the “blue chip way” to gain crypto exposure for investors, but doesn’t expect the company to return to recent levels of profitability in the near term without a spike in crypto prices or more volatility.

Meanwhile, JPMorgan told clients "we continue to recommend Coinbase as we see it as a leader in the crypto-ecosystem, but we acknowledge that crypto is in need of a catalyst and the risk in owning Coinbase stock continues to rise with positive earnings getting pushed further to the future." JPMorgan analyst Kenneth Worthington cut the bank's price target on Coinbase to $171 from $258, maintaining an overweight recommendation on shares.

Read more: Coinbase Has No Risk of Bankruptcy, New 10-Q Disclosure Language Is SEC Requirement, CEO Armstrong Says

Coinbase CEO Brian Armstrong nevertheless suggested in a tweet on Wednesday that his company's shares may now be undervalued.

Coinbase said in an earnings release after the market closed on Tuesday that it expects the second quarter to be weaker than the first with respect to monthly transacting users and overall trading volumes.

Some analysts see an opportunity in the battered shares of the crypto exchange, indicating potential for long-term growth.

Coinbase is trading as though it will “burn through all of its cash and then become insolvent,” Mark Palmer, BTIG’s equity research analyst said in a note. Eventually, investors will recognize an opportunity in the shares, he said, calling the stock drop “greatly overblown.” BTIG maintained a buy recommendation and lowered the price target to $380 from $500.

The company said it remains focused on investments, while acknowledging the choppy market conditions.

“We believe these market conditions are not permanent and we remain focused on the long-term,” the company said in the earnings release. “In fact, our investment in our business now is especially critical – these periods of low volatility can provide the opportunity to focus more intently on product development (as opposed to peak periods, when we are more focused on meeting high demand). We approach the opportunities ahead with confidence and steady hands.”

UPDATE (May 11, 13:35 UTC): Updates stock price movement.

UPDATE (May 11, 15:09 UTC): Updates with Goldman Sachs rating downgrade.

UPDATE (May 11, 20:07 UTC): Adds Brian Armstrong's tweet.