Goldman Sachs downgrades Coinbase’s (COIN) rating from “neutral” to “sell” and lowers its share price target from $70 to $45, the bank said in one of its reports Monday.
The decision comes amid the bear market and crypto winter, which is taking a heavy toll on the entire crypto market and global digital currency exchange. During Monday’s pre-market trading, Coinbase’s stock price plummeted to $57.58 by 8.07%.
William Nance, a Goldman Sachs analyst, explained the ongoing decline in crypto prices and the decline in activity in the crypto industry.
“We believe Coinbase will need to cut its cost base significantly to stem the resulting cash burn as retail trading activity dries up.”
Coinbase Suffers From Falling Trading Volume And Revenue
While Coinbase laid off 18% of its workforce as part of its overall reformulation, citing dire market conditions, the bank says the exchange may need to further downsize its workforce.
“Coinbase faces a difficult choice between shareholder dilution and significant reductions in effective employee compensation, which could impact talent retention.”
According to Bloomberg, Coinbase was valued at approximately $14 billion as of Friday with 20 buy ratings, 5 sell recommendations, and 6 holders.
The stock has also suffered from increased competition from other exchanges. Binance.US said earlier this month that it will offer free trading in Bitcoin and has ambitions to do the same for additional currencies in the future.
In the same Goldman Sachs report, it upgraded Robinhood (HOOD) from “sell” to “neutral”. The upgrade was with a price target of $9.5 which resulted in the share price rising to $8.21 during pre-market trading.
Coinbase’s revenue model is largely tied to trading earnings, which have shown a slight decline in recent months.