Monitors display Coinbase signage during the company’s initial public offering.
Michael Nagle/Bloomberg
Coinbase Global may have disappointed a few with its Nasdaq debut on Wednesday, but big gains are ahead, says a Wall Street brokerage that announced a bullish $500 share price target.
Analysts at BTIG on Thursday initiated coverage on the cryptocurrency exchange with a buy rating. The “gold standard among digital asset exchanges,” Coinbase is set for “sustained rapid growth” as the industry’s ecosystem expands and increasing institutional adoption provides a tailwind, Mark Palmer and Andrew Harte told clients in a note.
Coinbase’s listing announcement in late January is just one factor that has helped fuel enthusiasm for the crypto space this year, with Bitcoin surging to new records above $60,000 recently and up 117% so far in 2021.
The institutional world has also been climbing aboard, with financial services company Visa last month announcing plans to settle transactions in a “stablecoin,” USD Coin (USDC), while electric-car maker Tesla and digital payments companies PayPal and Square all offer transaction options in Bitcoin or other cryptos.
Share of Coinbase rose 2% to $336.60 in early trading on Thursday. The stock began trading on Wednesday at $381, up from a $250 reference price, climbing all the way to $429.54 before ending at $328.28. While some would have liked to see Coinbase hang onto those highs, the day still delivered a 32% gain, meaning it lived up to the hype. At its closing price, Coinbase was valued at $85.8 billion.
BTIG analysts base that $500 price target on 16 times the company’s full-year 2024 net revenues of $8.2 billion, following its initial public offering.
“We believe COIN, the most popular consumer-facing cryptocurrency exchange in the U.S., is positioned to be a primary beneficiary of the increased adoption of Bitcoin and other digital assets as it continues to scale in the U.S. and internationally,” say the analysts.
They see several ways for the company to build on its first-mover advantage as an “on-ramp for mainstream crypto investors,” such as diversifying its revenue stream away from transaction fees, a dependence that creates potential for volatility as crypto markets fluctuate. Also, the company can leverage its robust platform for institutional investors, a “key driver of growth going forward,” they say.
At the core of BTIG’s bullish view on Coinbase is the company’s market share, which the analysts note held 11.3% of the world’s crypto asset as of Mar. 31, up from 4.8% in 2018. At the end of the first quarter of 2021, the exchange held $223 billion of crypto assets on its platform. They also view it as a safe harbor among platforms, helped by its rigorous adherence to regulatory compliance.
If cryptocurrency’s “total market capitalization continues to grow, rising from about $2.1 trillion to a significant multiple of that figure, then the company’s upside could be immense,” says the BTIG team.
