As Coinbase struggles, you were better off just buying bitcoin, according to one analyst

Published Thu, Nov 11 20211:31 PM ESTUpdated Thu, Nov 11 20214:48 PM EST

While most Wall Street analysts are fairly bullish on Coinbase , one of the few with a neutral rating on the stock says crypto-curious investors and bitcoin bulls might be better off just buying the cryptocurrency. Mizuho analyst Dan Dolev pointed out in a note Thursday that Coinbase shares have performed in line with bitcoin since the week after the company went public in the spring. "Our analysis shows that Coinbase shares and bitcoin have both had roughly the same total return (5-10%)," Dolev said. "So why not just own bitcoin directly? Doing this could likely help avoid several key issues surrounding Coinbase including mounting competition and ongoing commoditization of crypto exchanges." Shares of the cryptocurrency services company rose 2.4% on Thursday. Earlier in the week, they took a plunge after Coinbase reported a revenue miss as part of its quarterly earnings. Many analysts and investors expected less-than-stellar results for the third quarter since the price of bitcoin was in a slump for most of the period. Coinbase's revenue is tied closely to trading fees, and crypto trading historically has been quieter in bear markets. On Wednesday, Dolev said in a separate note that Coinbase's third-quarter decline in the retail take rate, or percentage of each transaction it can keep as revenue, is among "the most dramatic compression in Coinbase's short history as a public company" and that it helped drive the nearly 20% revenue miss. That would play to one of the biggest themes in crypto of 2021: the surge in interest by institutional investors. However, Dolev also said in Thursday's note that "yield pressure is a likely headwind to the stock" and at Coinbase it "isn't limited to one type of market condition." "Following third-quarter results, we observed that yield pressure can occur in both periods of high volatility (e.g. in 1Q, which saw more high-volume low-yield Coinbase Pro user trades) and periods of low volatility (e.g. in 3Q, which saw Coinbase Pro users remain more resilient than Consumer users ... which also weighed on yield)," he said. Mizuho has a neutral rating on Coinbase and a price target of $300 per share, implying about 9% downside from Wednesday's close. Following Coinbase's quarterly report this week Mizuho reduced its full-year revenue estimates slightly for 201 but they were "largely unchanged" for 2022 and 2023.

Monitors display Coinbase and Bitcoin signage during the company's initial public offering (IPO) at the Nasdaq MarketSite in New York, U.S., on Wednesday, April 14, 2021.

Michael Nagle | Bloomberg | Getty Images

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