BofA: Coinbase Exchange Is Well Positioned to Take Market Share During This Crypto Winter

Coinbase (COIN) is well positioned to successfully navigate this crypto winter and take market share, Bank of America (BAC) said in a research report Tuesday. BofA maintained its buy recommendation following release of the exchange’s second-quarter results.

The results warrant “a muted stock reaction,” the report said. Net revenue of $803 million was below the bank’s and consensus of anlyst estimates, while Coinbase adjusted $151 million loss before interest, tax, depreciation and amortization was better than the Street expected.

Importantly, the exchange remains “cautiously optimistic” it can reach its goal of no more than $500 million of adjusted EBITDA loss for the full year, the report added.

Coinbase shares fell almost 8% in premarket trading to $80.74.

Bank of America said Coinbase had no counterparty exposure to the crypto insolvencies witnessed in the second quarter. The company also has a “history of no credit losses from financing activities, holds customer assets 1:1, and any lending activity of customer crypto is at the discretion of the customer, with 100%+ collateral required.” These rigorous risk-management practices will be a “positive long-term differentiator” for the stock, the bank said.

Read more: Coinbase Shares Drop as Crypto Winter Takes Toll on Exchange’s Trading Volume

Meanwhile, JPMorgan (JPM) said Coinbase had endured another challenging quarter, although the analysts noted some positive things.

Trading volume and revenue were down materially. Subscription revenue was also lower but would have been much worse were it not for higher interest rates, JPMorgan said in a research report Wednesday.

Coinbase is taking steps on expense management. In addition to reducing headcount inJune it is scaling back marketing and pausing some product investments, the note said.

The bank said Coinbase’s near-term outlook is “still grim,” noting the exchange expects a continued decline in third-quarter 2022 monthly transacting users (MTU) and trading volumes. Coinbase could take more “cost actions” if crypto prices fall further, according to the bank.

JPMorgan is less optimistic than Bank of America about the company in the near term, saying pressure on revenue from falling crypto markets will have a negative impact on the stock price. Still, it sees positives including higher interest rates, from which the firm will generate revenue. It also sees opportunities for the exchange to grow its user base, leveraging almost $6 billion of cash. The surge in crypto prices in July and the forthcoming Ethereum Merge are also seen as positive catalysts, it added.

The bank maintained its neutral rating on the stock and raised its price target to $64 from $61.