Coinbase Global Inc was downgraded by Goldman Sachs from a neutral rating to a sell rating as the crypto winter begins to take hold.
Coinbase was down by up to 8.3% to $57.50 at open on Monday extending a 75% decline. Goldman analyst William Nance cited a continued decline in crypto prices as well as a drop in activity levels across the industry.
Nance wrote, “We believe Coinbase will need to make substantial reductions in its cost base in order to stem the resulting cash burn as retail trading activity dries up.”
Coinbase was the darling of the crypto-world, as its value blew above $75 billion when bitcoin was hitting record highs. Once the crypto-selloff began in earnest however, declining revenues and reduced trading volumes took their toll. At Friday’s close the company was worth under $14 billion, and it would appear it still has farther to drop. Its average price share target is now $117, a record low.
In addition to the obvious headwinds it also is facing stiff competition from other exchanges. Binance.US now offers zero-fee crypto-trading for Bitcoin, and expects to expand that to other tokens in the future.
Coinbase announced it will attempt to reduce operating costs by reducing its workforce by 18%. In the first quarter, operating expenses had exploded to $1.7 billion.
Nance noted, “Coinbase faces a difficult choice between shareholder dilution and significant reductions in effective employee compensation, which could impact talent retention.”
