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Jefferies has revised its price target for Coinbase Global Inc. (NASDAQ: COIN) from $245 to $220, maintaining a Hold rating on the stock.

This adjustment reflects growing concerns over market conditions and declining volatility in the cryptocurrency sector.

The downward revision follows a substantial 28% drop in Coinbase’s total trading volume in Q2, with retail trading volume down by 34% and institutional volume by 26%.

The reduction in trading volumes has directly impacted Coinbase’s financial performance.

Transaction revenue fell by 27%, highlighting the sensitivity of Coinbase’s core business to market fluctuations.

Despite these challenges, Coinbase managed to increase its retail take rate by 13 basis points to 1.80%, thanks to new derivative products and wallet services.

The institutional take rate also saw a slight rise, reaching 0.34%, the highest since early 2021.

However, these improvements in take rates were insufficient to counterbalance the overall revenue decline.

Coinbase’s Q2 earnings report, released on August 1, underscored the company’s struggles.

Although it surpassed analysts’ revenue expectations with a $1.45 billion revenue for the quarter, up 104.8% year-over-year, its GAAP EPS of $0.14 fell short of estimates.

The company’s profitability was weighed down by a decline in trading volumes and higher operating expenses. Adjusted EBITDA dropped to $596 million from $1.01 billion in the previous quarter.

This was despite a 17% quarter-over-quarter increase in subscription and services revenue, which reached $599 million.

Trading volume for Q2 stood at $226 billion, down from $312 billion in Q1.

Notably, the volume shift towards Bitcoin and Ethereum, which generate lower spreads compared to smaller altcoins, contributed to the decline in revenue.

While Coinbase has diversified its revenue streams—showing robust growth in subscriptions and services—the company remains heavily reliant on transaction revenue, which is vulnerable to market volatility.

Efforts to expand its institutional client base through Coinbase Prime and the relaunch of operations in Hawaii are promising.

However, ongoing legal battles with the SEC and regulatory uncertainties continue to cast a shadow over the company’s prospects.

Coinbase’s current valuation presents a mixed picture. The stock’s forward P/E ratio of 36.2 might be viewed as high, given the company’s volatile revenue streams.

Nevertheless, Coinbase’s strong cash position, with $7.8 billion in USD resources, offers some protection against future market fluctuations.

As the stock navigates these challenges, technical analysis will be crucial in determining whether Jefferies’ reduced price target signals a selling opportunity or if it presents a potential buying opportunity.

After a dramatic surge of over 700% since the start of 2023, Coinbase’s stock hit a roadblock in March this year. The stock has attempted to break above $260 three times since then, only to retrace each time.

Source: TradingView

Before its Q2 results earlier this month, the stock found support around $209. However, this level has now become a resistance point, as the stock struggles to close above it. Without a daily close above $209, investors should be cautious about initiating new long positions.

Given the current weakness evident in the daily charts, bearish traders might consider opening a short position if the stock rises above $200, with a stop loss at $213.4. If the downtrend continues, the stock could fall back to its recent swing low near $160, providing a potential profit-taking opportunity.

The post Jefferies lowers Coinbase target to $220: Is it time to sell? appeared first on Invezz

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