Shares of Bitcoin exchange Coinbase hit a one-month high on Tuesday after the company announced it would lay off 20% of its employees. But Bank of America (BofA) strategists predict the stock could still drop another 18%.
Bank of America, Bitcoin exchange rally could be a selling opportunity
BofA strategists downgraded Bitcoin exchange Coinbase to ‘underperforming’. It also lowered the stock’s price target from $50 to $35. This marks a challenging year for the broader digital asset industry. The lower target represents a roughly 18% drop compared to the current price of about $42.80 per share. Meanwhile, Coinbase stock fell 83% in 2022. BofA strategists draw attention to the following issues in their report:
Based on fourth-quarter token trading volume data, and where the crypto outlook for 2023 is murky at best (as evidenced by COIN’s second-round layoffs announced yesterday), we’ve lowered our 2023 revenue projections for COIN even further below Wall Street.
As you follow on Kriptokoin.com, on Tuesday Coinbase announced its plan to lay off 20% of its staff to steer the turmoil in the crypto market, exacerbated by the collapse of rival exchange FTX. This brought with it an 11% stock boom. Meanwhile, last June the company also laid off 1,100 employees, or about 18% of its workforce at the time.
“We think individual crypto market participation will remain stagnant in 2023”
In December (the first full month after FTX’s collapse), Coinbase’s transaction volumes totaled $34 billion, according to Bank of America. It was also less than half of the company’s monthly average for the first three quarters of 2022. BofA’s outlook is around $49 billion per month, while other Wall Street firms expect Coinbase volumes to rise to about $67 billion per month, close to last year’s average. Strategists also make the following assessment:
This lower volume estimate brings a 5%/3% reduction in our 23 transaction turnovers/total net turnovers to $1,264 million/$2,253 million. That’s currently 32%/24% below Wall Street. With increased regulatory uncertainty and consumer confidence eroded by FTX, we expect individual crypto market participation to remain stagnant in 2023. We also note that the individual purchase rates of COIN are ~90 times the institutional rates.
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