Coinbase stock drops as Cowen downgrades on 2023 uncertainty

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By Senad Karaahmetovic

Shares of Coinbase (NASDAQ:COIN) are down more than 7% in pre-market Thursday after Cowen analysts downgraded to Market Perform from Outperform with the price target slashed by over 50% to $36 per share.

The new price target reflects slashed 2023 revenue and adj. EBITDA estimates, which now sit below Street. The analysts highlighted two key drivers behind the downgrade: 1) Low visibility per stabilization in retail trading volumes in 2023; and 2) Elevated potential for SEC enforcement action.

“... SEC needs to bring enforcement actions against trading platforms prior to expecting SEC Chair Gensler testifying before Congress in late Q1. We think there is risk to a material portion of COIN's non-BTC/ETH trading volumes (36%) and assets under custody (31%) that could be deemed securities by regulators, exacerbating trading volume deterioration,” they said in a downgrade note.

Given these elevated risks, the analysts see the potential for “another significant round of headcount reduction in early 2023.”

“We continue to think COIN is well capitalized to execute on product expansion in a multi-year downturn… We think a risk factor for shares is that sufficient headcount/cost reductions are not taken in early 2023,” they added.

Coinbase stock price closed at $37.70 yesterday.