Coinbase Analysts See ‘Green Shoots’ After Weak Third-Quarter Results

Coinbase (COIN) shares slid by as much as 10% Wednesday after the U.S. crypto exchange reported third-quarter revenue that fell short of expectations and weaker trading volumes than in the second quarter. The shares recently pared their drop to trade at $339 by publication time.

Some Wall Street analysts are taking a longer-term view of the crypto exchange. That stance backs Coinbase’s view that cryptocurrency volatility and rising prices in recent months should feed through to an increase in its transacting users and trading volumes in the fourth quarter.

Still, the decline in retail trading revenue divided by retail trading volumes is keeping Mizuho cautious. “Most significantly, 3Q saw a dramatic decline in the retail take rate, likely among the most dramatic compression in COIN’s short history as a public company,” analyst Dan Dolev wrote to clients in a note. Dolev maintains a neutral rating and $300 price target.

MoffettNathanson sees a bright spot in revenue from Coinbase’s subscription and services, or non-trading services, which rose 41% from the previous quarter. Analyst Lisa Ellis sees the “expansion of these services as the most notable source of upside to Coinbase’s financial performance” over the next three to five years. Ellis maintains a buy rating and $600 price target.

Needham is also looking ahead to different product launches, such as non-fungible tokens (NFT). “We continue to be positive on revenue diversification and new product launches (NFTs, futures, additional staking opportunities),” analyst John Todaro told clients in a note. Needham maintains its buy recommendation and $420 price target.

Coinbase should benefit from overall crypto adoption, JPMorgan said. “We see Coinbase continuing to outpace peers and still see the company as a strong investment based on continued growth of the cryptoeconomy,” analyst Kenneth Worthington wrote. He maintains an overweight recommendation on COIN and while boosting JPMorgan’s price target to $447 from $375.