Needham & Company analysts have expressed caution about the overly optimistic projections surrounding Coinbase (NASDAQ:COIN), suggesting that recent street forecasts for the company are "too bullish."
Despite a strong Q1 performance, Needham sees a challenging backdrop for the remainder of the year, leading them to adjust their forecasts accordingly.
According to Needham, "Street forecasts became too bullish following a strong Q1, and now miss the weaker backdrop that includes material declines from Q1 highs for many crypto assets."
The analysts highlight a decline in retail engagement, with most new entrants in the crypto space experiencing losses on their holdings, making them hesitant to invest further in the near term.
As a result, Needham is lowering their Q3 forecast and expects cuts to Q2 2024 consensus revenue and EPS expectations.
However, Needham remains optimistic about Coinbase's longer-term prospects. They retain a Buy rating and a price target of $260, noting multiple positive factors expected to impact the company in the second half of 2024 and early 2025.
These include the increasing odds of a Trump victory, which is seen as favorable for crypto from a regulatory and volume standpoint, as well as upcoming Ethereum ETFs and the positive outlook for bitcoin post-halving.
Despite the current challenges, Needham views Coinbase as a compelling investment opportunity within the growing crypto asset universe. They emphasize Coinbase's role as a market-leading fiat-crypto on-ramp and its expanding institutional business.
"We expect Coinbase to grow its trading revenue as the market-leading, fiat-crypto on-ramp in the quickly growing crypto ecosystem," the analysts state, adding that the company’s easy-to-use retail application and growing momentum among institutional firms position it well for future growth.
In summary, while acknowledging short-term hurdles, Needham sees significant potential for Coinbase in the evolving crypto market landscape.