Crypto exchange Coinbase (COIN) is facing new challenges from competitors. Indeed, analysts say that Coinbase’s ability to keep charging high trading fees is being threatened by cheaper rivals like Robinhood (HOOD) and Kraken, which are expanding their crypto services and starting to take market share. As a result, COIN stock fell 17% last week after a weak earnings report, which was the second-worst drop after an earnings report in its history.
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It is worth noting that for years, Coinbase has resisted lowering its fees, and even raised them on some stablecoin trades in March. But competition is growing quickly, with Robinhood’s fees at about half of Coinbase’s, while Kraken has added stocks and ETFs to keep users engaged. At the same time, Coinbase’s revenue growth slowed to only 3% in the last quarter, its slowest in two years, while Kraken’s and Robinhood’s crypto businesses grew by 18% and 98%, respectively. Even so, Coinbase still dominates the U.S. market with more than 50% of spot trading, though that lead has narrowed slightly in recent months.
Nevertheless, to stay competitive, Coinbase is expanding beyond crypto into what it calls an “everything exchange” that hopes to offer not just crypto but also stocks, futures, and prediction markets. It already benefits from the steady income of its custody services for Bitcoin ETFs and its partnership with Circle for stablecoins. However, with rivals cutting costs and fighting for market share, Coinbase’s high valuation of about 44 times forward earnings may be a risk that could send shares lower.
Is COIN a Good Buy Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on COIN stock based on 14 Buys, 13 Holds, and two Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average COIN price target of $375.18 per share implies 23.6% upside potential.
