Wells Fargo downgrades Coinbase stock to underperform

Wells Fargo analysts downgraded Coinbase stock to “underperform”. They cited the exchange’s struggles to maintain profitability, according to CoinDesk.

Experts justified their view by a shrinking market share amid rising competition. This leads to lower trading fees and reduced profitability, they added.

In the client note, the path to sustainable profitability is expected to be challenging given the current trends in a crypto winter.

Analysts valued Coinbase’s fair value at $57. Trading on September 29 closed at $61.94. Since the start of the year, the company’s market capitalization has fallen 75.5%.

In August, S&P Global downgraded the exchange’s corporate rating from ‘BB+’ to ‘BB’, keeping the ‘negative’ outlook.

Coinbase’s net loss in the second quarter of 2022 $1.1 billion, which was twice analysts’ expectations. Net revenue in April–June fell from last year’s $2.03 billion to $803 million. Trading commissions accounted for 82% of net revenue.

In August, Coinbase CEO Brian Armstrong said that the platform is cutting costs and shifting its focus to subscriptions and services amid crypto winter.

In the same month Coinbase agreed to collaborate with BlackRock. Clients of the latter will get direct access to trading digital assets through the Aladdin portfolio-management system.

Earlier, it emerged that the platform was attempting to profit from prop-trading. To this end the firm allegedlyallocated $100 million.

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