Coinbase – Credit Suisse is starting to report on Chesapeake Energy as an outperformer. Chesapeake is an energy company that has led the US shale boom. After years of leading oil drilling developments across the United States, he ran into huge debt and filed for bankruptcy protection in the summer of 2020. After the restructuring was completed, it was revived from bankruptcy in February last year.
Credit Suisse assessed that Chesapeake’s restructuring resulted in a stronger balance sheet, lower cost structure, and stronger fundamentals. It was also positive that the company’s shift to natural gas would provide shareholders with above-average cash returns. Chesapeake stock is up 44.7% this year. Of course, yesterday’s crash was a big drop, but it’s still performing well this year.
However, Credit Suisse notes that the stock remains undervalued despite the big gains this year. Considering energy prices and sales this year and next year, it is expected to generate $5 billion in free cash flow. It is also expected to record a total dividend of $2.5 billion next year and a cash return of more than 20%. On top of that, if they succeed in getting activist investors to sell their holdings, they expected the stock to rise further. He also suggested a target price of $115. That’s 23% higher than Monday’s closing price.
Coinbase said in an email to its employees that it would cut 18% of full-time jobs. We currently have about 5,000 full-time employees, which means we are going to lay off about 1100. Chief Executive Officer Brian Armstrong stressed the need for such cuts, citing the possibility of a recession and the company’s inefficiency. He noted that the company grew too fast during a bull market. He also feared that this could lead to, and prolong the crypto winter, what appears to be a recession after more than a decade of economic boom.
“It’s difficult to predict the economy or the market, but we always plan for the worst so we can do business in any environment,” he explains.
Coinbase, which was listed amid the booming cryptocurrency market, has plummeted 79% this year and 85% from its peak. Along with the sell-off for risky assets, it was affected by the drop in cryptocurrency prices. As I told you yesterday, the cryptocurrency market is undergoing a major correction. I told you yesterday that the price of Bitcoin fell below $24,000. Since then, Bitcoin has fallen to as low as $21,000.
Under this circumstance, JP Morgan even issued a report downgrading its investment opinion on Coinbase from Overweight to Neutral. This is because when the price of cryptocurrency falls, interest in the cryptocurrency market decreases, and in the end, fees, which are the main income of Coinbase, are inevitably reduced. We also lowered our target price from $171 to $68.