A recent earnings report by cryptocurrency exchange Coinbase surpassed analysts’ expectations, a fact duly noticed by major institutions such as Goldman Sachs, Bank of America, JPMorgan, and Barclays. Yet, this silver lining can’t completely outshine the cloud of concern hovering over Coinbase’s potential for growth in the long term.
Goldman Sachs analysts remained unimpressed with Coinbase’s long term valuation, noting fundamental issues rooted in the nature of the crypto industry itself: the asset class still lacks a sustainable everyday utility value. The company’s significant levels of stock-based compensation, even when adjusted against their profitability, did little to assuage such apprehensions. Thus, Goldman still maintains the “sell” rating on Coinbase shares.
Bank of America, though it acknowledged positive metrics in the second quarter report, expressed concerns about revenue diversification and retail volumes – two factors critical for the future health of any company in the evolving and highly competitive crypto landscape.
Another competitor in the financial arena, JPMorgan, acknowledged the ‘significant beat’ but was quick to point out an underwhelming volume in transactions for the second quarter. Interestingly, even as Coinbase faces the headwinds, it was reported that the market shares seemed to quietly slip towards competitors, Robinhood and Block. JPMorgan anticipates an increase to around $97 million in staking revenue in the third quarter, citing the higher yield on the ethereum (ETH) they saw in July.
Meanwhile, in the face of the ongoing lawsuit against the U.S. Securities and Exchange Commission (SEC), Barclays noted that Coinbase management adopted a rather bullish stance, confident in their ability to win the case. They also pointed out that the second quarter exceeded expectations due to greater retail transactions and reduced operating costs.
Coinbase shares, however, experienced a dip in early Nasdaq trading, falling 0.3% to $90.48. This once again highlights that notwithstanding its recent performance, skepticism about the company’s positive long-term prognosis persists, primarily due to concerns about the profitability and stability of the crypto asset class.
Source: Coindesk
