The COIN second quarter results missed Wall Street estimates earlier this week, but analysts believe that the company's balance sheet will be well positioned to survive a prolonged Winter of Cryptocurrencies. In addition to posting $1.1 billion net loss, the company missed Wall Street's expectations on revenue, trading volume, and assets held on the platform, with $453 million coming from a decline in Coinbase's balance sheet.
The fate of the first large cap cryptocurrencies stock depends on whether the exchange holds enough cash reserves, according to Lisa Ellis, partner with MoffettNathanson after June's sluggish economic crisis and 8 mentions of Crypto Winter during its Tuesday second quarter earnings call.
In a note following Q2 earnings, Ellis pointed out that although Coinbase reported $5.68 billion in cash and cash equivalents at the end of the quarter, it also holds $500 million in Circle's stable coin, USDC, pushing cash resources above its first quarter level to $6.2 billion.
Ellis explained to Yahoo Finance that coinbase has no real urgency or concern around liquidity.
Ellis sees the company's burn falling to around $200 million per quarter after burning through $1 billion in the first half of 2022, according to the exchange's cash burn-rate in a research note following the company's Q 2 earnings call.
Even if the winter of cryptocurrencies continues for another six quarters, which would be typical, they ll still be sitting at around $5 billion in cash, Ellis said.
Chris Brendler, a senior analyst at the D.A. investment banking firm, is a senior analyst. Davidson is showing more confidence in the COIN after the second quarter.
Brendler said in a Wednesday note that casual retail activity is holding up better than expected, and the company's cut of trades increased to 1.34% against expectations for 1.24%. Brendler increased his price target on shares from $90 to $100, despite the fact that the outlook remains murky for COIN. The firm expects Coinbase's lifeblood profit line — average monthly revenue per active user — to be bottom in the third quarter.
The recent rally gives us confidence in an eventual recovery when the Fed really pivots. Brendler said that COIN is well positioned to withstand the winter and emerge stronger and leaner on the other side.
The price of the coin was below $89. Early on Thursday, the price was down over 5%.