Needham & Company analysts have expressed caution about overly bullish forecasts for Coinbase (NASDAQ:), suggesting that recent market forecasts for the company are “overly bullish.”

Despite the powerful first-quarter results, Needham is predicting challenging conditions for the rest of the year, prompting the company to adjust its forecasts accordingly.

According to Needham, “Street forecasts have become overly bullish following a strong Q1 and now fail to factor in a weaker backdrop that includes significant declines from Q1 highs for many crypto assets.”

Analysts are highlighting a decline in retail engagement, with most fresh entrants to the cryptocurrency market posting losses on their assets, making them hesitant to invest further in the near future.

As a result, Needham is lowering its third-quarter guidance and expects consensus cuts for revenue and earnings per share expectations in Q2 2024.

Needham, however, remains bullish on Coinbase’s long-term prospects. They maintain a Buy rating and $260 price target, noting a number of positive factors that are expected to impact the company in the second half of 2024 and early 2025.

These include the increasing chances of a Trump victory, which is seen as positive for cryptocurrencies from a regulatory and volume perspective, as well as upcoming Ethereum ETFs and a positive outlook for Bitcoin after the halving.

Despite the current challenges, Needham sees Coinbase as an attractive investment opportunity in the growing crypto asset universe. They emphasize Coinbase’s role as a leading entry point into the fiat-crypto market and its growing institutional business.

“We expect Coinbase to grow its trading revenues as the market-leading platform for connecting fiat and cryptocurrencies to the rapidly growing cryptocurrency ecosystem,” the analysts said, adding that the company’s easy-to-use retail app and growing momentum among institutional firms position it well for future growth.

Overall, Needham, while acknowledging there are some hurdles in the brief term, sees significant potential for Coinbase in the changing landscape of the cryptocurrency market.