Goldman Sachs Reduces Coinbase Price Target to $41 Following FTX Crash
Goldman asserts that although there is a reduction in the Coinbase price target, the exchange remains insulated against the FTX fallout.
Goldman Sachs recently cut the price target of crypto exchange Coinbase (NASDAQ: COIN) to $41 from $49 on the heels of the FTX collapse. According to the multinational investment bank and financial services company, COIN remains insulated from the FTX crash. However, despite the lower revision of its 12-month price forecast, Goldman still maintains a sell rating on Coinbase stock. In addition, the banking giant also provided new revenue estimates for the Brian Armstrong-led crypto exchange, saying:
“We have also updated our 2022/2023/2024 revenue estimates from $3.26 billion/$3.18 billion/ $3.34 billion to $3.29 billion/$2.71 billion/$2.76 billion.”
In addition to impacting Coinbase, Goldman also reckons that the FTX crash will have a limited effect on the financial services platform Robinhood (NASDAQ: HOOD). The popular trading and investing app previously stated that revenue derived from crypto constitutes just 9% of total earnings. Thus, Goldman’s revised 12-month price target for HOOD stands at $12.50, from an initial $13.
Goldman Identifies Coinbase Shield Against FTX Effect
Goldman’s analysts credit Coinbase’s highly liquid balance sheet as providing a cushion for the exchange against the FTX fallout. In addition, the banking giant’s equity research team also explained that Coinbase’s lack of proprietary trading activities acts as an additional buffer for the exchange. In the near term, Goldman’s analyst team sees Coinbase remaining unaffected by any crypto market volatility that may arise from FTX’s collapse.
Last week, Coinbase CEO Brian Armstrong provided insight into the company’s mode of operations, including any potential stake with FTX. Accordingto the exchange’s chief executive, Coinbase has no significant exposure to the ill-fated Bahamian exchange or its native FTT token. In addition, Armstrong also pointed out that his company does not have any significant investments in the FTX-affiliated platform Alameda Research. Describing FTX’s failure as a result of risky business practices, Armstrong emphasized that “Coinbase has always strived to be the most trusted player in the space, and we don’t engage in this type of risky activity.”
Further doubling down on Coinbase’s commitment to remain prudent and transparent, the company’s CEO also stated at the time:
“We decided early on to be the most trusted crypto company out there, and the events of the [FTX tailspin and subsequent crash] underscore why this has been so important. We’ll continue to work with regulators around the world and help build trusted and reliable products for the industry.”
Late last week, FTX filed for bankruptcy in the US, which reverberated across the entire crypto landscape. The company had been teetering on the brink of collapsing in the days leading up to its eventual downfall. A number of factors are responsible for the FTX implosion, including Alameda’s massive amount of FTT on its balance sheet.
FTX also saw a large spate of customer withdrawals in the days leading to its bankruptcy and was in need of over $8 billion to remain afloat. Although Binance appeared set to buy the company out of despair just before it crashed, the Changpeng Zhao-led company opted out.