“We believe further cuts are needed, as the announced cost reduction effort merely brings headcount back to end-1Q22 levels,” Nance wrote, adding that Coinbase “will need to make substantial reductions in its cost base in order to stem the resulting cash burn as retail trading activity dries up.”
Nance estimates that Coinbase’s revenues will plunge more than 60% this year compared to 2021.
Robinhood rallies on M&A hopes
Robinhood had no comment on Monday’s Bloomberg report. Bankman-Fried said in a statement to CNN Business that “there are no active M&A conversations with Robinhood,” even though FTX is “excited about Robinhood’s business prospects and potential ways we could partner with them.” Shares of Robinhood pulled back Tuesday.
Still, some on Wall Street continue to express optimism about Robinhood’s future.
Analysts at Mizuho Americas wrote in a report Tuesday that if a deal with FTX were to materialize, that would help Robinhood “expand its reach and breadth.” The Mizuho analysts added that they also think Robinhood “can survive, and thrive, on its own.”
And Goldman Sachs’ Nance said in Monday’s Coinbase report that he was upgrading Robinhood to a “neutral” from a “sell.”
Nance’s reasoning for the nudge upward? Robinhood’s market valuation was about $6.5 billion prior to Monday’s FTX rumor-fueled stock pop, only slightly higher than the $6.2 billion in cash on its balance sheet, suggesting limited downside.
But he added that Robinhood’s “fundamentals are still very weak … as continued declines in retail trading risk appetite have weighed on active users.”