On Friday, Mizuho Securities maintained its underperform rating on Coinbase (NASDAQ:COIN) Global Inc. (NASDAQ:COIN) stock, with a steady price target of $145.00.
The firm's stance comes in light of Coinbase's first-quarter performance, which, despite being strong, was anticipated due to the increased volatility and rise of Bitcoin and other cryptocurrencies since the beginning of the year.
The resilience of Coinbase's take rates is seen as a positive aspect; however, Mizuho anticipates the stock may face downward pressure. This outlook is partly due to the projection that the second-quarter transaction revenue run-rate could be 16% lower than the first quarter, based on April's $300 million transaction revenue.
Additionally, the firm pointed out that alternative cryptocurrencies (alt-coins) and staking now represent 45% of Coinbase's total revenue. This figure has risen from 42% in the fourth quarter of the previous year and from 32% a year earlier. The growing reliance on these sources of revenue is noteworthy as they could be increasingly subject to regulatory scrutiny.
Moreover, while other financial metrics like Subscription and Services (S&S) revenue exceeded first-quarter guidance, coming in at $511 million versus the forecasted $410 to $480 million, Mizuho believes this outperformance does not warrant the stock's over 30% increase in value.
Mizuho's analysis suggests that despite Coinbase's solid first-quarter achievements, the future revenue outlook and potential regulatory challenges pose risks to the stock's current valuation. The firm's reiteration of the underperform rating and price target reflects a cautious stance on the cryptocurrency exchange's near-term prospects.
InvestingPro Insights
As Coinbase Global Inc. navigates the dynamic cryptocurrency market, real-time data from InvestingPro reveals a nuanced picture of the company's financial status. With a significant market capitalization of $56.17 billion, Coinbase trades at a high earnings multiple, as reflected by its P/E ratio of 567.99. This high valuation metric aligns with the Mizuho Securities' concern on the stock's current valuation despite the company's strong first-quarter performance.
InvestingPro Tips highlight that analysts are optimistic about Coinbase's profitability, with net income expected to grow this year and five analysts revising their earnings upwards for the upcoming period. This could indicate a potential upside that Mizuho's underperform rating doesn't fully capture. Moreover, the stock's substantial price uptick over the last six months, with a 166.72% total return, suggests a strong market confidence that may support the company's resilience in the face of regulatory scrutiny and revenue diversification.
For readers looking to delve deeper into Coinbase's prospects, there are additional InvestingPro Tips available that can offer further insights into the stock's performance and valuation. To access these valuable tips and metrics, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.