Analysts at Needham & Company have expressed caution about overly optimistic projections surrounding Coinbase (NASDAQ:), suggesting that recent forecasts for the company are “too optimistic.”
Despite a strong first quarter performance, Needham expects a challenging environment for the remainder of the year, prompting them to adjust their forecasts accordingly.
According to Needham, “Street forecasts became overly optimistic following a strong first quarter, and now overlook the weaker backdrop that includes substantial declines from first-quarter highs for many crypto assets.”
Analysts are highlighting a decline in retail participation, with most new entrants into the crypto space experiencing losses in their holdings, making them hesitant to invest further in the near term.
As a result, Needham is lowering its third-quarter guidance and expects cuts to consensus revenue and EPS expectations for the second quarter of 2024.
However, Needham remains optimistic about Coinbase’s long-term prospects. He maintains a Buy rating and a $260 price target, and highlights multiple positive factors expected to impact the company in the second half of 2024 and early 2025.
These include the increasing odds of a Trump victory, which is seen as favorable for cryptocurrencies from a regulatory and volume standpoint, as well as upcoming Ethereum ETFs and the positive outlook for Bitcoin post-halving.
Despite the current challenges, Needham sees Coinbase as an attractive investment opportunity within the growing crypto asset universe. He highlights Coinbase’s role as a market-leading platform for converting cryptocurrencies to fiat and its expanding institutional business.
“We expect Coinbase to grow its trading revenue as the market-leading fiat-crypto on-ramp into the rapidly growing crypto ecosystem,” the analysts said, adding that the company's easy-to-use retail app and growing momentum among institutional firms position it well for future growth.
In short, while acknowledging short-term hurdles, Needham sees significant potential for Coinbase in the changing cryptocurrency market landscape.
