Why Coinbase Stock Has Analyst Remaining On The Sidelines

After a strong debut earlier this month, Coinbase Global, Inc. COIN shares have come off the highs hit during that time.

The Coinbase Analyst: Mizuho Securities analyst Dan Dolev initiated coverage of Coinbase stock with a Neutral rating and $285 price target.

The Coinbase Thesis: Coinbase could face downward pressure on commissions, given over 80% of its revenues are from retail transaction fees and the higher user sensitivity to transaction fees, analyst Dolev said in the note.

There is also significant overlap with PayPal Holdings Inc. PYPL and Square Inc.'s SQ Cash App, he added.

Related Link: Why Square, PayPal Are Top Picks In The Fintech Space Ahead Of Earnings

Coinbase's fees, according to the analyst, may face downward pressure from compelling platforms following the footsteps of zero-commission stock trading. The company relies on commissions for the vast majority of its revenues as opposed to PayPal and Cash App, which primarily use crypto trading products as engagement tools, he added.

"COIN is a major share gainer, with best-in-class user engagement," the analyst wrote in the note.

However, the risk of pricing pressure offsets the abounding opportunities surrounding the stock, he added.

Related content: Benzinga's Full Analyst Ratings Calendar

COIN Price Action: At last check, Coinbase shares were down 5.92% to $293.45 at publication Thursday afternoon. 

Related Link: The Coinbase IPO Ushers In The Next Phase Of The Crypto Bubble: Investing Like It's 1929

(Photo: Coinbase)