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CoinBase Stock (NASDAQ: COIN)
Coinbase’s prices may vary with bitcoin’s short-term worth, but Canaccord bets on the future of blockchain technology and initiates the crypto exchange coverage as a purchase.
Canaccord set a one-year price target of $285 on the stock, which is 12 times its enterprise value-to-sales estimate for 2022. The enterprise value-to-sales ratio compares the value of a company to its sales revenue.
“Market share and technology leaders that leverage their positions to drive innovation through the creation of new customer behaviors present some of the most compelling, long-term value propositions in the market,” according to the investment firm. “Although there will be ongoing volatility, we do not believe that comparing the longer-term potential of blockchain and digital assets to what we have seen in ecommerce is incorrect.”
Based on the volatility of crypto spot prices so far in June, the analysts believe Coinbase shares will face headwinds in the short term.
“If we are in a bitcoin holding pattern here for a while,” they said, “COIN may see sequentially weaker financial performance.”
Still, “we remain biased to the upside on bitcoin medium term and believe that resilience and elegance in the blockchain provide a great foundation for the entirety of digital assets from here,” the analysts wrote.
Canaccord’s analysts highlighted bitcoin’s increasingly vertical supply curve — that is, the fact that quantities are limited, regardless of how much investors are willing to pay — as well as institutional interest in digital assets, comparative valuation to other stores of value, and “importantly what we view as an inevitable U.S. ETF.”
Sunrun (NASDAQ: RUN)
Sunrun’s shares surged more than 10 percent on Wednesday after Morgan Stanley ranked himself “the most convincing clean-energy stock” throughout the company’s portfolio.
Analyst Stephen Byrd also increased his Sunrun target from $86 to $91, indicating about 110% of the closing price on Tuesday.
“Sunrun is a beneficiary of several megatrends,” Byrd wrote, “including rising utility costs and falling clean energy and storage costs, grid reliability impacts from climate change, and consumer demand for clean energy.”
Sunrun shares have fallen more than 50% since reaching an all-time intraday high of $100.93 on Jan. 12, and Morgan Stanley believes the company’s current valuation does not accurately reflect the company’s growth opportunity. According to Byrd, the stock is pricing in roughly six years of operations and no customer growth after that, “essentially implying that the stock price suggests RUN will go out of business in six years.”
The firm also stated that the company, which is the largest residential solar installer in the United States, generates higher cash flows than consumers realize, citing the large total addressable market. Currently, only about 3% of houses in the United States have solar panels.
Broader adoption of electric vehicles is another potential source of growth for Sunrun, with Morgan Stanley estimating that it could “create as much value for RUN as RUN’s entire current business.”
In May, the company announced a collaboration with Ford in which the company’s F-150 Lightning pickup truck will include an at-home EV charger and an inverter. In the event of a power outage, the truck could then power critical products and possibly an entire home. Customers will also be able to get solar installations from the company.
“This EV opportunity could be quite significant in comparison to the overall size of Sunrun’s new customer value creation,” Morgan Stanley said.
Sunrun’s stock has recently taken a hit, owing in part to rising interest rates, which have weighed on growth-oriented stocks more broadly.
Morgan Stanley stated that while the company is highly leveraged to interest rates, the management team has levers to pull, such as possibly refinancing debt or changing the structure of the capital stack.
Sunrun shares are down 31% this year, but up 137% in the last 12 months.
Cryptocurrency ethereum has exceeded bitcoin this year, and Morgan Stanley gave many explanations.
When examining why ether is currently outperforming bitcoin, one important factor to consider is energy usage.
In the note, Morgan Stanley strategist Sheena Shah and equity analysts James Faucette and Betsy Graseck wrote, “ETH is considered more ‘green’ than bitcoin.”
Crypto miners use custom-built computers to solve complex mathematical equations that allow a coin transaction to take place. Miners are rewarded for their efforts in mining whatever coin they are mining. However, because of the amount of power used by the computers, the entire process, known as proof of work, is energy intensive.
To reduce ether’s electricity consumption, the Ethereum Foundation is switching its transaction approval process to proof of stake rather than proof of work.
In theory, this means that all someone needs to become a validator on the network is proof of ownership of some ether, or a “stake.” Finally, it should eliminate the need for massive amounts of computing power to validate transactions, and the Ethereum Foundation claims it will use 99.9% less energy than before.
“Increased concerns about bitcoin’s energy usage made ether relatively more appealing because PoW doesn’t use as much energy to run, at the expense of transaction security,” Morgan Stanley experts wrote.
It is worth noting that other coins, such as Cardano and Algorand, already operate on proof-of-stake networks.
Coins may be destroyed.
Ether will also have a new “money supply plan” in July, which will change how miners are paid and make ether scarcer.
“A protocol upgrade (called EIP-1559) is expected, in which the fees that miners are currently paid (in ETH) will be ‘burned’ instead of being given to miners,” Morgan Stanley analysts wrote. “The ETH money supply will be destroyed, making it even more scarce.”
Finance that is decentralized
Other cryptocurrencies, in addition to ether, rely on ethereum’s blockchain, which is a growing list of records, known as blocks, that are linked together using cryptography.
According to Morgan Stanley analysts, the vast majority of so-called decentralized finance is still based on the Ethereum blockchain.
However, new competitors are emerging, and ethereum is no longer the preferred blockchain for cryptocurrency developers. “Most new coins chose to use an existing blockchain, which was mostly ethereum until a year ago,” the analysts said.
“Ethereum transaction fees rose rapidly this year as more digital assets used the blockchain, pushing the limits of how ethereum is currently set up to handle transactions,” they added.
Binance, the world’s largest cryptocurrency exchange, created the Binance Smart Chain and made it relatively simple for developers of existing ethereum-based coins to port their coins to the BSC.
The carbon footprint of Bitcoin
Bitcoin has come under significant pressure in recent months as people become more aware of how much energy it can store.
According to Digiconomist, it has a carbon footprint comparable to New Zealand, emitting 36.95 megatons of CO2 per year. This is a major source of concern in countries all over the world that are attempting to reduce carbon emissions and mitigate climate change.
Tesla CEO Elon Musk announced last month that his electric car company will no longer accept bitcoin as payment due to environmental concerns, causing the price of bitcoin to plummet by 5% in a matter of minutes. However, he stated this week that Tesla will resume accepting bitcoin as long as miners use more clean energy.
Meanwhile, China, which has some of the world’s cheapest electricity, is enforcing strict new regulations on bitcoin mining. When the Chinese Communist Party announced in May that it would “crack down on bitcoin mining and trading behavior,” the price of bitcoin dropped by 25% in a matter of days.
“China’s crackdown appears to be linked to China’s newly stated efforts to reduce carbon emissions,” the analysts wrote. “Approximately two-thirds to three-quarters of bitcoin mining is thought to be done in China, a significant portion of which uses electricity from coal-powered plants.”
They pointed out that bitcoin miners in the country are either moving elsewhere (to use alternative energy sources) or cashing out, which hasn’t helped prices.