Coinbase cuts costs and boosts rep, but profits remain challenged: Analyst

According to investment analysts, cryptocurrency exchange Coinbase, despite having a strong brand and reputation in the crypto market, will not survive the profitability challenges it will face in the crypto market downturn.

Credit rating firm Moody’s issued a note on Coinbase on January 19 that discussed Coinbase’s senior debt and downgrading of its corporate family rating (CFR) — a rating that indicates a company’s ability to honor its financial obligations. is assigned to express opinions of ability.

Coinbase’s CFR and senior debt were re-rated to B2 and B1, respectively, from Ba3 and Ba2, indicating that the firm is “non-investment grade” and “speculative and of high credit risk,” according to Moody’s. subject”.

The firm noted that Coinbase is suffering from “significantly weaker earnings and cash flow generation” due to “challenging conditions,” particularly depressed crypto prices and lower trading activity.

Coinbase saw market conditions Lay off 20 percent of your employees.About 950 people, on January 10, the second wave of recent major layoffs since June 2022. 18% headcount slash In an attempt to minimize cos

Coinbase CEO Brian Armstrong at a conference in 2018. In the most recent round of layoffs, he said the firm “needs adequate operational performance to weather the downturn in the crypto market.” Image: Flickr

However, despite Coinbase’s bid to preserve liquidity, Moody’s still “expects the company’s profitability to remain challenged.”

The bankruptcy of its crypto exchange peer, FTX, raises concerns and uncertainty regarding crypto regulation, according to Moody’s.

He said the sudden move by regulators in the crypto industry could negatively impact Coinbase’s earnings through increased regulatory compliance costs.

Moody’s added, however, that increased oversight “may ultimately favor relatively more mature and compliant crypto-asset platforms such as Coinbase.”

Meanwhile, a separate note from JPMorgan analysts argued that Coinbase’s credibility and reputation in the industry has strengthened following the recent collapse.

“While the crypto-ecosystem has faced more significant reputational issues, Coinbase has emerged with its reputation and brand stronger — at least relatively.”

Analysts at the financial firm, who maintained a “neutral” rating for Coinbase in their latest note, said Coinbase could also be a “beneficiary from the challenges” other exchanges face with FTX. It has to be done in perspective.

coming up The Shanghai Hard Fork According to analysts at JPMorgan, the Ethereum blockchain could also be a positive for the exchange.

Related: Coinbase halts Japan operations amid trade slowdown

The upgrade “could usher in a new era of staking for Coinbase,” with analysts estimating that 95% of retail investors on the platform could stake Ethereum post-upgrade, giving Coinbase It could go up to about $600 million annually.

Coinbase shares hit a record low of $31.95 on Jan. 6 after more than a year of price declines, according to Yahoo Finance. Data. A day ago, veteran investor and CEO of ARC Invest, Cathy Wood Worth $5.7 million of Coinbase shares.

Since then, Coinbase’s share price and Other Crypto Related Companies have increased.

Coinbase has rallied 72.6% since its Jan. 6 lows and traded above $55 at market close on Jan. 20, where it saw an 11.6% gain on the day.