Why AMD and Coinbase Weighed on the Nasdaq Thursday
The first quarter of 2022 has been volatile, so it makes sense that investors would want to coast on the last day of the quarter. Most stock market indexes stayed close to unchanged, with the Nasdaq Composite (NASDAQINDEX: ^IXIC) lower by just 25 points as of 11:45 a.m. ET to 14,417. That would leave the Nasdaq down in the first quarter, but well off its worst levels of just a couple of weeks ago.
A few notable stocks helped drag the Nasdaq down. Advanced Micro Devices (NASDAQ: AMD) and Coinbase Global (NASDAQ: COIN) have been high-profile stocks with plenty of potential upside, but they've also drawn differing opinions from those who follow them. On Thursday, both AMD and Coinbase got some negative reviews from Wall Street's finest. Read on to learn what the pros think about the prospects for these two high-growth companies.
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AMD gets downgraded
Shares of Advanced Micro Devices had fallen more than 6% near midday Thursday. The semiconductor giant has been on a tear for several years, but analysts have rising concerns about the sustainability of its gains.
The move lower came after Barclays cut its rating on the semiconductor stock from overweight to equal weight. Barclays also reduced its price target from $148 per share to $115, which was below where the shares closed on Wednesday.
Analysts don't question the trends that have helped support AMD's big move higher recently, including a 57% rise in 2021. However, they do increasingly believe that with the semiconductor industry having seen nearly ideal conditions for quite a while due to chip shortages, there's danger that the historically cyclical industry will face a downturn next year as some of its customers face deteriorating fundamentals. In addition, competition from other chipmakers is starting to play a bigger toll, especially as consolidation in the industry could pose new threats.
AMD investors still have to be pleased with the progress the business has made in recent years, shedding its perennial also-ran status to become a credible leader in semiconductors. Nevertheless, shareholders don't want to see AMD lose its hard-won momentum.
Coinbase faces crypto critics
Elsewhere on the Nasdaq, Coinbase Global shares were down more than 2%. An analyst initiated coverage that was generally cynical about the cryptocurrency exchange leader's business model.
The new coverage came from US Tiger, which made its initial rating of sell. The analyst set a $135-per-share price target on Coinbase stock, representing about a 30% drop from where the crypto exchange provider's shares started the day.
US Tiger's argument against Coinbase is similar to what some other analysts have cited. Coinbase is highly exposed to the ups and downs of the cryptocurrency market, benefiting from higher trading interest during boom times for digital tokens but remaining vulnerable when trading volumes fall during downturns. Moreover, despite its first-mover status, Coinbase hasn't convinced US Tiger that it has any sustainable competitive advantage over new entrants in the crypto broker space. The potential for Coinbase to need to cut its fairly lofty fees is therefore high and represents a threat to its margins.
There's no doubt that Coinbase has opened the door for a host of new crypto market participants. Whether it can sustain their interest, though, is another thing entirely. Investors should tread carefully.
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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns and recommends Advanced Micro Devices and Coinbase Global, Inc. The Motley Fool has a disclosure policy.
