Analysts are still learning how to set a medium-term price target for a stock that is closely linked to the price of a volatile cryptocurrency. Coinbase was the first cryptocurrency exchange to list its products on public exchanges. The majority of its revenue comes from trading fees, which fluctuate with the crypto markets.
Analysts covering the stock, on the other hand, understand the long-term nature of the young industry. Coinbase reported $3.45 per share, outperforming Wall Street expectations by $1.12. The exchange reported revenue of $2.23 billion, exceeding the estimated $1.78 billion.
Analysts are also optimistic about the company’s long-term prospects.
They wanted to see proof that Coinbase is reducing its reliance on bitcoin trading, which has dropped to 24 percent of total trading volume. This is down from 39% in the first quarter.
The company also demonstrated that it is expanding its capabilities. It introduced the Coinbase Card, introduced Coinbase Cloud, and began beta testing Coinbase Prime for institutional clients.
The exchange also increased its user base, which analysts see as a sign of critical health for the business and broader adoption of cryptocurrencies, and maintained its pricing despite concerns about fee compression. Analysts also stated that the company’s careful approach to regulation and compliance positions it well to become a systemic part of the cryptocurrency ecosystem one day.
Here’s what analysts had to say about Coinbase:
Compass Point is neutral, with a price target of $265.
“As COIN expands its marketing efforts, customer service, and overall platform investments, expenses are expected to rise. We are cautious in the near term due to regulatory headlines/focus and the potential for pricing compression as the retail platform converges and institutional adoption grows – we would note, however, that we can make longer-term bull cases for COIN on all of these fronts over time.”
Oppenheimer – Outperform, $444 price target
“In the short term, fee compression appears overstated, and crypto summer appears to have arrived, reverting the dislocation between fundamentals and valuation. Longer term, we favor the crypto adoption trend and the disruptive nature of digital assets, whether we are in crypto winter or summer. Coinbase, in our opinion, is an enabler of crypto innovation and will have a strong voice in the development of digital assets.”
Wedbush Securities – Outperform, target price of $300
“On the surface, a massive quarterly beat, despite a sequential decline in crypto assets on the platform, with September MTUs expected to fall from the June quarter.” We highlight a number of positive factors: 1. The decrease While MTUs are expected to decline in the September quarter, pricing recovery in crypto assets will provide a nice offset, contributing to Q3/CY21 revenues; 3. Annual revenue or fee per user is expected to reach record levels, indicating t
D.A. Davidson – Buy, target price $400
“With the volume explosion in the first quarter, COIN’s take rates fell as volumes skyrocketed. Institutional rates are so low (four basis points) that they are largely insignificant, but retail take rate fell sharply (1.49 percent to 1.21 percent) as retail activity shifted from Coinbase to Coinbase Pro. This trend was likely to continue until the market dropped in mid-May, but consensus 2Q estimates predicted another significant drop (1.12 percent).”
JPMorgan – Overweight, $372 price target
“Today, earnings are concentrated in cryptocurrency transactions, but we see Coinbase expanding into other cryptocurrency services… The industry has faced challenges with secure custody, and Coinbase has a segregated and battle-tested institutional solution. We see opportunities for Coinbase to expand its crypto cash management, lending, advice, and other cryptocurrency services, mirroring what we see as traditional brokerage profit centers. We see these offerings as complementing Coinbase’s expanded presence in the cryptoeconomy, which includes transaction and custody of NFTs, digital contracts, security tokens, and smart contracts.”
Piper Sandler – Overweight, $335 price target
“COIN appears to be in compliance with any pending regulations. COIN has stated that they work with regulators and hope to incorporate them into the company’s development. They have emphasized their efforts to educate both regulators and legislators. And, while we expect crypto regulation to ramp up in the near to medium term under SEC Chair Gary Gensler (and others such as Congress and regulatory & governmental bodies), we suspect that the credibility that regulatory scrutiny will give to the crypto industry in the medium to long term will far outweigh any delays or minor setbacks it may cause in the short term.”
Goldman Sachs – Buy, $337 price target
“We view the take rates trends as positive, including 1) retail take rates were actually up despite the increase in volume in the quarter, and could have a further upward bias (in our opinion) in the near term if the lower volume environment in July drove take rates in Coinbase Pro into a lower pricing tier, and 2) the company addressed concerns about platform pricing harmonization between Coinbase and Coinbase Pro.
BTIG – Buy with a price target of $500.
“As a result, any excitement about COIN’s strong 2Q21 metrics was quickly dampened by management’s disclosure that its MTUs and trading volumes had indeed been soft during July and only slightly less so during early August, and as a result, the company’s share price was flattish during extended trading. We were among those who predicted that investors would scrutinize COIN’s 2Q21 results regardless of how strong they were, a view informed by the fact that the company’s stock price has essentially mirrored sentiment in the crypto market since its direct listing in mid-April. COIN’s shares had risen ahead of the 2Q21 report, mirroring the recent rally in crypto prices.”
