Coinbase Stock Tumbles as ‘Crypto Winter’ Arrives

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“Crypto winter” has arrived and

Coinbase

Global stock is paying the price after releasing earnings following Tuesday’s close. Wall Street, as ever, remains optimistic.

Coinbase reported a loss of $1.98 a share, missing forecasts for a 1-cent loss, on sales of $1.165 billion, below forecasts for $1.5 billion. As a result, the stock has fallen 16% in premarket trading Wednesday.

Still, analysts haven’t seen the need to change their ratings on the stock. Of the 12 analysts who released reports on Coinbase following the news, none changed their rating, with four maintaining their Neutral ratings, seven retaining their Buy ratings, and just one, Raymond James’ Patrick O’Shaughnessy reiterating his sell.

Still, even the optimists sounded discouraged. Needham analyst John Todaro called the results “disappointing.” Still, he wrote that he continues “to see longer term growth opportunities for the company and remain excited around blockchain rewards, and cloud subscription services.”

Wedbush analyst Moshe Katri, meanwhile, noted that Coinbase blamed the loss on reduced trading and continued investment “despite what’s emerging to be a ‘crypto winter,’ suggesting the company went through multiple, similar cycles in the past.” So why is he optimistic? He’s thinking long-term, as is the company. “From our perspective, we see one of the most differentiated players in the industry …with significant scale, flushed with cash ($7B+; accounting for roughly 1/3 of COIN’s market cap), efficiently and strategically managing its operation, cognizant of the market’s volatility, but also planning for a potential stabilization/recovery in crypto asset volatility,” he writes.

That’s cold comfort, however, for investors who bought the stock at the beginning of the year, only to watch it drop more than 70% through Tuesday’s close. Raymond James’ O’Shaughnessy—he of the Sell rating—acknowledges the debate over whether the declines are simply reflective of a cyclical crypto winter that occurs periodically or something more serious. He settles on the latter.

“While management strongly believes the former will prove to be true, we suspect there is more than a bit of truth to the latter, particularly with crypto failing to serve as an inflation hedge thus far in 2022,” O’Shaughnessy writes. “Over the longer-term, we continue to believe that significant retail pricing pressure is a matter of when, not if, and also believe the cons of increased crypto regulation down the road will decidedly outweigh the pros.”

He has been right so far. Why doubt him now?

Write to Ben Levisohn at ben.levisohn@barrons.com