Gemini Space Station (GEMI) shares crashed on March 18 after Citi analysts downgraded the crypto exchange to “Sell” and lowered their price target to $5.50, indicating more than 20% downside from their previous close.
The timing of this downgrade proved particularly damaging, as it came just ahead of the firm’s Q4 earnings, scheduled for release after hours on Thursday.
Gemini stock is now down nearly 50% versus its year-to-date high in early January.
Why Citi Turned Bearish on Gemini Stock
Citi’s downgrade centers on profitability concerns within the current crypto market environment, where depressed Bitcoin (BTCUSD) and Ethereum (ETHUSD) prices have created headwinds for Gemini’s core revenue streams.
According to the investment firm, a decline in cryptocurrency valuations is hurting trading volume, resulting in pressure on both its transaction and custodial fee revenue. These are structural headwinds that can’t be easily dismissed, given their direct connection to crypto prices, it told clients.
Despite massive year-to-date declines, GEMI shares’ relative strength index (14-day) sits at about 36 currently, signaling there’s still room for further downside before entering oversold territory.
Why GEMI Shares May Still Be Worth Owning
Long-term investors may still consider loading up on Gemini shares as the Nasdaq-listed firm has already provided its preliminary earnings guidance.
This means its Q4 earnings scheduled for later today may not yield notable surprises for investors. The selloff, therefore, may be an overreaction to known headwinds — not a disclosure of new ones.
Meanwhile, GEMI has demonstrated positive momentum in credit card revenue, which represents a diversification away from crypto-dependent revenue streams.
Continued strength in this business could support a meaningful stock price recovery as the year unfolds. According to Barchart, options traders currently see a path for Gemini Space Station to rally past $9 by mid-October.
What’s the Consensus Rating on Gemini Space Station?
Investors could also take heart in the fact that other Wall Street firms disagree with Citi’s bearish view on the Winklevoss Twins’ company.
While the consensus rating on GEMI stock sits at a “Hold,” the mean target of $13.35 suggests it could more than double from here over the next 12 months.
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