Coinbase Downgraded to Neutral by Atlantic Equities

According to Atlantic Equities analyst Simon Clinch, it’s time for investors to step back from Coinbase after its recent rally. In a recent report, Clinch downgraded Coinbase to neutral but raised his price target. The analyst expressed concerns over continued regulatory challenges and weak trading volume, making the risk/reward profile less attractive.

Price Target and Performance

Clinch’s new price target for Coinbase is $80, representing a downside of about 10% from the previous day’s closing price of $89.15. Despite the downgrade, Coinbase shares were up 0.6% in premarket trading on Wednesday. The crypto stock has experienced a significant rally of over 150% this year, fueled partly by optimism surrounding the ongoing legal battle with the U.S. Securities and Exchange Commission (SEC).

Crypto Volume and USDC

An interesting observation by Clinch is the current low level of cryptocurrency trading volume, even with the high prices attracting investor sentiment. Additionally, the market capitalization of stablecoin USDC has seen a decline, which also impacts Coinbase’s interest income line. These factors lead Clinch to express concerns about the outlook for the rest of the fiscal year.

Near-Term Pullback Risk

In light of these factors, Clinch believes there is a risk of a near-term pullback in Coinbase shares. While the recent strength in crypto asset prices has been favorable, the potential deterioration in the company’s performance and market dynamics raise caution.