JPMorgan analyst Kenneth Worthington downgraded Coinbase to Neutral from Overweight with a price target of $68, down from $171. The analyst continues to be a believer in the cryptocurrency markets and blockchain technology, but says the “extreme decline” in the price of cryptocurrency markets in Q2 combined with Coinbase’s ramp in investment “would appear to not only make it challenging for it to generate a profit in the near future but also to meet its annual loss cap” of $500M of annual EBITDA. Worthington sees the potential for more downside to the shares should cryptocurrency markets not stabilize and should management not announce more definite steps to reducing the cost base. Since Coinbase generates the substantial portion of its revenue base on the value of the cryptocurrency token prices and much of the rest based on sentiment, the downturn in crypto prices is likely to have a “material negative impact” on its revenue, Worthington tells investors in a research note.
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