Jefferies Initiates Coverage of Crypto Exchange Coinbase With ‘Hold’ Rating

Coinbase’s (COIN) premium brand as an onshore and regulated entity with a healthy balance sheet should enable the crypto exchange to weather the fallout from the collapse of rival FTX, Jefferies said in a research report Monday.

The broker initiated coverage of the stock with a hold rating and a $35 price target. Coinbase shares rose over 7% in early trading to $35.65.

“The fallout from FTX has called into question the safety, security and legitimacy of the broader crypto ecosystem,” the report said, worsening an already difficult operating environment, as retail trading volumes slumped along with crypto prices.

Coinbase will be “acutely pressured in the near-term” as its retail customer base trades less frequently in the bear market, but the company has staying power due to its healthy balance sheet with over $5 billion in cash, it's proactive approach to regulatory compliance, prudent risk management and its legitimacy as a publicly listed and audited company, the note said.

The competitive landscape will be less crowded for Coinbase post-FTX, but Jefferies still expects a top-line miss in the fourth quarter due to lower retail trading volumes. The company is likely to report fourth-quarter results toward the end of February, based on previous patterns.

Rival broker Cowen downgraded the shares to market perform from outperform on Thursday, citing a lack of clarity on a possible recovery in trading volumes following the collapse of FTX.

Read more:  Cowen Downgrades Coinbase Stock, Citing Trading Volume Declines