Shannon Stapleton/Reuters
- Coinbase stands to face steeper competition and its shares are likely to fall to $100 or less, New Constructs CEO David Trainer said about the crypto exchange operator.
- Coinbase is expected to report first-quarter earnings of $3.07 per share on revenue of $1.82 billion on Thursday.
- "The stronger Coinbase's earnings are now, the more attractive this fast-growing market looks to larger competitors," said Trainer.
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Shares of Coinbase will likely continue their descent and drive down to $100 or even lower, said veteran Wall Street analyst David Trainer who sees competition making it difficult for the cryptocurrency exchange to meet future profit expectations.
The warning from the New Constructs CEO comes ahead of Coinbase's first-quarter results on Thursday after the closing bell. Coinbase will present figures for the first time since its shares began trading in April on Nasdaq, cheered at the time for breaking new ground as the first cryptocurrency platform to go public.
"Coinbase is not likely to fulfill the profit expectations baked into the stock's current valuation of $58 billion due to rising competition in the cryptocurrency trading space, which should reduce the company's market share and pricing power," Trainer said in a Tuesday note.
"Investors," he said, "should expect the stock to continue to underperform, as shares could fall to $100 or less as it becomes clear the company is unlikely to meet the future profit expectations baked into the stock price."
Coinbase is expected to post first-quarter earnings of $3.07 per share on revenue of $1.82 billion, according to a FactSet poll of analysts. Even if Coinbase were to exceed first-quarter expectations, New Constructs expects the stock to continue to fall over the long term.
"The stronger Coinbase's earnings are now, the more attractive this fast-growing market looks to larger competitors with greater resources," said Trainer. He said PayPal and Square already charge lower fees than Coinbase, and trading app Robinhood offers its customary zero-commission service for buying and selling cryptocurrencies offered on its platform.
"Coinbase will likely not be able to sustain blowout earnings going forward as competition enters the market," he added, echoing his early April warning about competition facing Coinbase from Gemini, Bitstamp, Kraken and Binance. New Constructs ahead of Coinbase's trading debut called the company's potential $100 billion valuation "ridiculously high."
In Coinbase's trading debut on April 14, the stock opened at $381, which put the company's valuation at $99.5 billion. a larger market capitalization than that of auto maker General Motors and parcel services company FedEx.
Coinbase hit a high of $429.54 in its first trading session before closing at $328.28.
Coinbase shares on Wednesday fell by as much as 4.8% to $288.46, driven down alongside a broader slide in tech shares after key US inflation data came in much higher than expected.