FILE PHOTO: A smartphone with displayed Coinbase logo and representation of cryptocurrencies are placed on a keyboard in this illustration taken, June 8, 2023. REUTERS/Dado Ruvic/Illustration/ File Photo
(Reuters) -Coinbase shares slumped 15% and hit their lowest in more than a month on Friday, after the crypto exchange reported a drop in second-quarter adjusted profit due to a slowdown in trading.
The stock was last trading at $321.68, set to wipe out $14.3 billion of market value if current levels hold. It has gained 52% this year as of last close, ranking among the top 15 gainers on the benchmark S&P 500 index, which Coinbase joined in May.
"We see the shares as significantly overvalued. We believe that the market is projecting too much future growth for the firm," Morningstar analyst Michael Miller wrote in a note.
The sharp investor reaction underscores the challenge Coinbase, as a major player in the crypto space, faces to sustain its recent strong revenue growth.
By contrast, Robinhood, which has a smaller footprint in the segment, reported that its crypto trading revenue had nearly doubled in the second quarter.
"We believe investor enthusiasm had reached a 'fever pitch' heading into last night's results, as valuation has detached from underlying fundamentals," analysts at H.C. Wainwright wrote in a note.
Coinbase posted adjusted profit of $33.2 million, or 12 cents per share, during the three months ended June 30, compared with $294.4 million, or $1.10 apiece, a year earlier.
Bullish crypto sentiment encouraged investors to hold their assets, limiting trading activity and contributing to the lower volatility Coinbase saw during the period.
Analysts, however, said trading volumes could improve this quarter, based on the company's revenue estimates for July.
The month saw a surge in crypto enthusiasm after the Genius Act was signed into law. The landmark legislation pushed bitcoin to a record high.
(Reporting by Alun John in London and Niket Nishant in Bengaluru; Editing by Amanda Cooper, Sriraj Kalluvila and Shilpi Majumdar)
