Goldman Sachs downgrades Coinbase’s (COIN) rating from “neutral” to “sell” as well as slashes its stock price target from $70 to $45. The decision was announced by the bank in one of its reports on Monday.
The decision comes amidst the bear market and crypto winter, taking a toll on the entire crypto market and the global digital currency exchange. During the pre-market trading on Monday, the share price of Coinbase plummeted to $57.58 by 8.07%.
William Nance, a Goldman Sachs analyst, stated the continued downfall in crypto prices and the fall in crypto industry activities.
“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 has been suffering from declining trading volume and revenue
Even though Coinbase laid off an 18% workforce as part of the overall reframing, citing harsh market conditions, the bank states that the exchange might need to cut down the staff further.
“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 around $14 billion with 20 buy ratings, 5 sell recommendations, and 6 holds as of Friday.
The stock has also been affected by heightened competition from other exchanges. Binance.US said earlier this month that it will provide fee-free trading for Bitcoin and that it has ambitions to do the same for additional currencies in the future.
In the same report by Goldman Sachs, it upgraded Robinhood (HOOD) from”sell” to “neutral”. The upgrade was with a $9.5 price target which resulted in the price of the shares rising to $8.21 during the pre-market trading.
Coinbase’s revenue model has been largely tied to trading revenue which is witnessing a slight dip in recent months.