Analyst Note| Michael Miller |
Low trading volume and much higher expenses led no-moat Coinbase to report a net loss of $1.98 per share for the first quarter. As we incorporate these results, we are reducing our fair value estimate to $131 per share from $210 as the firm now requires substantially higher levels of cryptocurrency trading volume to generate a profit. A higher breakeven point effectively increases Coinbase's already high leverage to volatile cryptocurrency market conditions. Cryptocurrency markets are highly unpredictable, and Coinbase has said it is willing to lose up to $500 million in EBITDA per year, making the timing for a return to positive earnings unclear.