Coinbase could jump 36% as it is the best way to invest in the cryptocurrency ecosystem, Goldman Sachs says

Coinbase IPO
  • Coinbase could surge 36% as it’s the best way to invest in the cryptocurrency ecosystem, Goldman Sachs said in a note on Monday.
  • The bank initiated Coinbase at a Buy rating with a $306 price target.
  • “The continued success or failure of cryptocurrencies as an asset class will inevitably determine COIN’s longer-term fate,” Goldman said.
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Shares of Coinbase Global could surge 36% to $306 as the crypto-exchange platform represents the best way for investors to gain exposure to the crypto ecosystem, Goldman Sachs said in a note on Monday.

The bank admits that much of Coinbase’s long-term trajectory will be determined by the success of failure of cryptocurrencies as an asset class, but believes the company represents “a blue-chip way through which to invest in the development of the ecosystem,” according to the note.

Coinbase’s crypto ecosystem is powered by its careful approach to regulatory compliance, its crypto-native technology stack and deep talent pool, and its role as an innovation hub for new crypto endeavors, Goldman said.

“While we believe the core business today offers an attractive growth profile with the potential to drive high levels of profitability, we see significant white space for new initiatives to drive more stable and recurring revenue streams to complement the core trading business over the longer term,” Goldman explained.

That “white space” Goldman references includes exposure to innovations in DeFi, or decentralized autonomous blockchain applications, stablecoin-based payments, and the adoption of non-fungible tokens, or NFTs.

“If meaningful parts of the economy can transition to blockchain and crypto-native technology over time, we see significant opportunity for COIN to benefit from its status as a critical element of the financial infrastructure for the ecosystem,” Goldman said.

In the meantime, continued user growth should drive strong growth in transaction revenues over time, which currently represent about 96% of Coinbase’s annual revenue.

Shares of Coinbase have performed poorly since its direct listing in mid-April, which coincided with a top in the price of bitcoin. Coinbase is down 48% from its all-time high of $429.54, based on Friday’s closing price. Shares were up more than 2% in Monday morning trades.

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Coinbase could jump 21% due to growth in the ‘cryptoeconomy’ and buy in from institutional investors, CFRA says

coinbase direct listing
People watch as the logo for Coinbase Global Inc, the biggest U.S. cryptocurrency exchange, is displayed on the Nasdaq MarketSite jumbotron at Times Square in New York, U.S., April 14, 2021.

Coinbase could surge 21% due to the growing “cryptoeconomy” and a push to lure in more institutional clientele, CFRA Research says.

In a note to clients on Friday, CFRA analysts led by Chris Kuiper, CFA, initiated coverage on shares of Coinbase with a “buy” rating and a $400 12-month price target.

The price target represents a potential 21% jump from Monday’s intraday low of $330 per share.

Kuiper and his team said they believe Coinbase could exceed the Street’s high expectations given the growth potential of the “cryptoeconomy.” The analysts see Coinbase becoming one of the largest financial exchanges worldwide and are betting institutional clients will take note.

“Our base case scenario implies COIN not only becomes one of the largest financial exchanges for crypto but that it is also successful in diversifying into other products and services, most notably those aimed at institutional investors, an area it has more aggressively pursued over the past two years,” Kuiper wrote.

Kuiper and his team also presented earnings per share estimates of $6.89 for 2021 and $3.00 for 2022 in their note to clients and said they see operating margins ramping and then stabilizing at 35%.

In a separate thematic research note that was also released on Friday, CFRA highlighted Coinbase’s push for institutional clients, saying the group is seeking to build a “one-stop-shop” for institutions to access the crypto markets.

CFRA analysts laid out three scenarios for Coinbase’s shares, a bear case where the company trades at $120, a base case where the firm hits $400, and a bull case where shares could rise as high as $840 per share.

The bull case implies a potential 145% jump in share prices over the next year amid a push for crypto from institutions. It also assumes a CAGR of 36% for the next decade, slightly below Amazon’s 40% CAGR from 1998 to 2009, and puts Coinbase’s revenue north of $19 billion by 2027.

CFRA analysts are definitely bullish on the prospects of Coinbase after its historic direct listing.

Coinbase went public on Wednesday of last week and saw its shares open at $381. However, the crypto exchange’s stock then sank as much as 19% in opening day trades, before recovering to end the week at $342.

Some market commentators have called the Coinbase public listing a “watershed moment” for the crypto community. Coinbase is now worth more than General Motors, FedEx, and Twitter.

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Coinbase’s eye-popping $100 billion valuation is reasonable for a disruptive, cutting-edge crypto firm, an early backer says

puppies in the Coinbase office
  • Santosh Rao, the head of research at Manhattan Venture Partners, believes a $100 billion valuation for Coinbase is reasonable.
  • Manhattan Venture Partners was an early investor in Coinbase, Palantir, Draft Kings, and more.
  • Based on estimated 2022 figures, Coinbase will trade at around 11x sales and 27x EBITDA with a $100 billion valuation.
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Coinbase is set to make its public trading debut on Wednesday and some market commentators are questioning its lofty valuation. Manhattan Venture Partners, an early backer of the crypto exchange, believes the massive figure is justified.

Santosh Rao, the head of research at the merchant bank, says a $100 billion valuation for Coinbase is “totally reasonable” given the disruptive nature of the crypto firm.

Manhattan Venture Partners was an early investor in Coinbase as well as a number of other big-name tech companies like SpaceX, Palantir, and Draft Kings.

Rao sat down with CNBC on Wednesday to discuss Coinbase’s public debut and his firm’s investments.

The head of research highlighted the fact that based on estimated revenues and earnings for 2022, at a roughly $100 billion valuation, Coinbase will trade at just over 11x sales and 27x EBITDA.

Those figures aren’t outlandish for a company that has demonstrated consistent growth, according to Rao.

Coinbase released impressive first-quarter results on April 6 that showed a 117% quarter-over-quarter increase in monthly transacting users. The company also earned more revenue in the first quarter of 2021 ($1.8 billion) than it did in all of 2020 ($1.3 billion).

The rising revenue came amid a historic run for bitcoin that saw the cryptocurrency rise more than 300% in 2020, and an additional nearly 100% in the first quarter of 2021 alone.

Some market commentators are predicting a further 10%+ breakout moving forward as well.

When asked whether crypto prices need to keep going higher in order for Coinbase to maintain its lofty valuation, Rao said it would help, but argued the company has a range of services on offer to offset any downfall in crypto prices.

“That’s their core business at this point, but they have other services too. And they have a subscription product coming up, a whole range of services, the custody services, they have a number of other levers to pull as they go up,” Rao said.

Read more: Bitcoin is a headache to store, and that’s created an investment opportunity that could theoretically pay determined traders big risk-free returns by December

The head of research added that, in his view, there’s no reason why crypto prices should stop going up as investors are starting to realize the space will become “an integral part of the financial system going forward.”

Rao also noted that of the best features of Coinbase is that it’s “agnostic” towards individual cryptocurrencies, meaning if bitcoin falls and other cryptocurrencies rise, Coinbase will still benefit.

The head of research at Manhattan Venture Partners ended the interview by saying that Coinbase has the breadth, scale, and technology to keep competitors at bay over the long haul.

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Coinbase’s expected $100 billion valuation is ‘far too high’ given the increasing competition in the cryptocurrency market, a veteran stock analyst says

coinbase mobile phone app
In this photo illustration, Bitcoin course’s graph is seen on the Coinbase cryptocurrency exchange application on February 12, 2018 in Paris, France. Founded in June of 2012, Coinbase is a digital currency wallet and platform where merchants and consumers can transact with new digital currencies like bitcoin, ethereum, and litecoin. The company is based in San Francisco, California generated in 2017 a record turnover of one billion dollars (about 810 million euros) with exceptional trading volumes, which made it the most downloaded mobile app on iOS last December.

  • Coinbase’s rumored $100 billion valuation is “far too high,” said New Constructs CEO David Trainer.
  • The cryptocurrency exchange is set to go public via direct listing in the near future.
  • Trainer said increasing competition in the crypto exchange market will weigh on Coinbase’s lofty valuation.
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Coinbase could go public via a direct listing as early as March, but New Constructs CEO David Trainer says investors should not buy the stock if the valuation is anywhere close to current expectations.

The cryptocurrency exchange platform has a rumored valuation of roughly $100 billion, which is “far too high” given the increasing competition in the market, Trainer said in a recent note.

Although the company achieved profitability in 2020, the current expected valuation implies that Coinbase will become the largest exchange in the world by revenue, which isn’t guaranteed given the existence of competitors like Gemini, Kraken, and Binance, he added.

In 2020, transaction revenue represented over 96% of Coinbase’s net revenue, according to Coinbase filings. Trainer points out that the exchange’s transaction revenue as a percent of trading volume is 57 times higher than the Intercontinental Exchange, which runs the New York Stock Exchange.

Competitors will likely emulate Coinbase’s high margins, and the exchange’s “competitive position will inevitably deteriorate,” Trainer said.

“…if stock trading fees are any indicator for crypto trading fees, we should expect them to quickly go lower if not to zero,” said the research analyst. “Competitors such as Gemini, Bitstamp, Kraken, Binance, and others will likely offer lower or zero trading fees as a strategy to take market share, which would start the same “race to the bottom” that we saw with stock trading fees in late 2019.”

“The likelihood of Coinbase maintaining such high fees is very low in a mature market,” he added.

With an expected valuation of $100 billion, Coinbase would earn a “neutral” rating from New Constructs.

Last week, D.A. Davidson initiated coverage of Coinbase with a “buy” rating and price target of $195. However, the analysts said it’s too early to tell if Coinbase will become the “Amazon of crypto” or the failing Netscape.

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Coinbase’s direct listing is ‘an Amazon moment for crypto,’ and will bring cryptocurrency further into mainstream finance, D.A. Davidson says

Coinbase Founder and CEO Brian Armstrong
Coinbase Founder and CEO Brian Armstrong

  • Coinbase’s upcoming direct listing will be an “Amazon moment” for cryptocurrencies, according to D.A. Davidson. 
  • The firm initiated coverage of the crypto exchange with a “buy” rating and $195 price target. 
  • D.A. Davidson said the public debut will be a milestone for the convergence of cryptocurrency and traditional finance.
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Coinbase’s upcoming direct listing will be a milestone event, marking the covergence of cryptocurrency and traditional finance, according to a team of D.A. Davidson analysts. 

In a recent note D.A. Davidson initiated coverage of the cryptocurrency exchange with a “buy” rating and a price target of $195. Analysts led by Gil Luria said Coinbase’s public debut will be the “Amazon moment for crypto,” as cryptocurrency will move from “a large curiosity to becoming the future path for much of the financial system.” 

Coinbase will be the first major cryptocurrency exchange to go public. According to the analysts, the exchange’s superior user experience has positioned it as the “leader” in facilitating the onramp/off-ramp from government currency (like dollars) in crypto (like bitcoin.)

“With a big target on its back as a crypto wallet, (to date) Coinbase has been able to manage both government regulators as well as highly motivated hackers, while providing consumers with the experience they expect from a large financial institution,” the analysts added.

As both an exchange and broker, Coinbase’s competition includes Grayscale, Kraken, and Gemini, as well as broader consumer digital wallets like Square, PayPal, and Robinhood, said D.A.Davidson.

The firm’s $195 price target is based on 2021 revenue estimates, but the firm has not been able to connect with Coinbase during its quiet period. Revenue in 2020 was $1.28 billion, a jump from $553.7 million in 2019, according to a consolidated operations statement included in Coinbase’s filings.

For the year ended December 31, 2020, transaction revenue represented over 96% of net revenue. Bitcoin has soared 68% in 2021 and it’s unclear how that affects revenue estimates.

D.A. Davidson noted Coinbase is a more speculative investment than other companies it covers. They also noted the unusually high risks associated with the volatility of crypto prices, and said it’s too early to tell if Coinbase will actually become the Amazon of crypto or the Netscape.

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