Shares of cryptocurrency exchange Coinbase Global were wobbling on Thursday, but at least one bullish call from Wall Street was cheering them on.
Analysts at BTIG initiated coverage on the digital currency platform with a buy rating and a $500 price target. Stock in Coinbase headed higher in opening trade, but has since slipped 1.6%.
“We believe COIN should be regarded as a market leader in a category characterized by rapid and apparently sustainable growth driven by significant changes in consumers’ behaviors and their adoption of new technology,” said BTIG analysts Mark Palmer and Andrew Harte, to clients in a note.
“As such, we think the multiple at which COIN is valued should reflect that distinction as it does for other category leaders with open-ended growth opportunities such as [videotelephony program] Zoom
[electric-car maker] Tesla
and [cloud computing data company] Snowflake
” they said. BTIG rates those companies buy, unrated and neutral, respectively.
Coinbase is the “gold standard among digital asset exchanges,” they said. Its “sustained rapid growth” is coming as the industry’s ecosystem expands and institutional adoption increases, they said. Financial services company Visa
last month announced plans to settle transactions in a “stablecoin” backed by the dollar, while Tesla
and digital payments companies PayPal
all offer transaction options in bitcoin or other cryptos.
The institutional embrace and general enthusiasm by individual investors are among the factors that have helped fuel enthusiasm for the crypto space this year, with bitcoin
recently surging to new records above $60,000, with a gain of 117% so far in 2021.
Coinbase began trading on Wednesday at $381, up from a $250 reference price, and climbed 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.
The BTIG analysts based 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,” said the analysts.
They believe the company has several ways 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 said.
At the core of BTIG’s bullish view on Coinbase is the company’s market share, which they noted held 11.3% of the world’s crypto asset as of March 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 viewed 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,” said the BTIG team.