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.
Coinbase’s $100 billion stock market debut is a watershed moment for the cryptocurrency industry that will fuel a boom in investment, crypto exchange chief executive Kris Marszalek has said.
The head of the Crypto.com exchange told Insider that the direct listing “immediately reprices all the companies and all the deals in this space.” He added that it was “extremely positive news for the whole industry.”
Yet, Marszalek said Coinbase still faced some challenges, the main being the volatility of bitcoin and other cryptocurrencies and their resulting trading revenues. Exchanges need to add new lines of business to tackle this problem, he said.
Coinbase, the US’s biggest cryptocurrency exchange, listed directly onto the Nasdaq exchange on Wednesday. Its valuation at one point shot above $100 billion but it closed at around $65 billion.
Crypto-enthusiasts and traditional investors alike were captivated. Many commentators hailed the listing as a coming-of-age moment for cryptocurrencies.
Edward Moya, senior market analyst at Oanda, said on Wednesday: “Bitcoin has survived years of skepticism and today’s Coinbase debut is an exclamation point that cryptocurrencies are here to stay.”
Marszalek’s Crypto.com exchange is a smaller but sizable rival to Coinbase, with just over 10 million users compared to Coinbase’s 56 million. He said the listing was a huge boost to the industry in general, in part because of the buzz it generated.
“It was so broadly covered… it was unavoidable,” he said. “And this will result in further allocations to the space by institutions.”
Coinbase, ticker COIN, is now one more way for people to get exposure to bitcoin and crypto, Marszalek said. “I expect a little bit of a cool-down after such a seminal event, but it’s not going to [last] long.”
But the Crypto.com boss said the most positive effects would come from the spotlight the IPO shined on the industry.
“It attracted a lot of attention and what it does is it immediately reprices all the companies and all the deals in this space, regardless of the [fundraising] stage [they’re at]. All these deals are suddenly repriced in this new reality.
“Fundamentally, it will result in more capital flowing into crypto companies. And that means more resources at their disposal to hire more engineering talent, bring in more people, innovate more, just basically drive this industry forward.”
With 96% of Coinbase’s revenue coming from transaction fees on trading, the danger is that a sharp fall in bitcoin and other currencies could badly hurt the company’s quarterly results.
Coinbase is well aware of this, with CEO Brian Armstrong saying on Wednesday that the company will diversify away from transaction fees over the next 5 to 10 years, by developing products like crypto cards.
Marszalek, whose company has a Visa crypto card and recently launched a NFT marketplace, said: “The question is who is going to be able to build a robust business that doesn’t just stand on one leg.”
He added: “We will see who manages to do it over the next couple of years, it’s going to be a fun thing to watch.”
Shares of Coinbase climbed as much as 6% on Thursday following its debut on the Nasdaq on Wednesday, after various funds managed by Cathie Wood’s ARK Invest snapped up around $250 million worth of shares.
The stock pared gains in early trading, rising 1.1% to $331.75 at 10:35 a.m. in New York.
The listing of Coinbase was celebrated by many cryptocurrency bulls who view the move as a milestone for the digital currency ecosystem that has long faced scrutiny and skepticism.
“Coinbase’s direct listing on Nasdaq is a major step forward in bringing legitimacy and mainstream awareness to the digital asset sector as a whole,” Brad Kam, co-founder of Unstoppable Domains, told Insider.
“For the next billion cryptocurrency users, it will be critical that we focus on ease of use. Millions in funds have been lost due to typos in hard-to-read wallet addresses or simply sending the wrong coin to the wrong wallet,” he said.
Coinbase, one of the world’s most popular and earliest cryptocurrency exchanges, made its public market debut on Wednesday, riding the wave of mainstream investors’ growing interest in digital currencies.
Coinbase’s highly anticipated direct listing resulted in its shares closing at $328.28 on Wednesday, giving the company a valuation of $85.7 billion – around 10 times what it was last valued at as a private company, according to PitchBook.
That’s up 31.3% from Coinbase’s reference price of $250. But because it opted for a direct listing, no shares traded at that price, instead opening at a price of $381.
CEO and cofounder Brian Armstrong’s stake – 2.75 million Class A shares and 36.9 million Class B shares – is now worth a combined $13 billion.
Two Coinbase executives, Chief Product Officer Surojit Chatterjee and Chief Legal Officer Paul Grewal, both of whom joined the company less than 15 months ago, have stakes worth a combined $957 million.
At Wednesday’s closing price, Chatterjee’s 2 million Class A shares are worth $657.2 million, while Grewal’s 915,331 Class A shares are worth $300 million.
Chatterjee joined Coinbase in January 2020 after having previously been at Google for 11 years. Grewal joined just last summer, leaving his four-year tenure as a vice president and deputy general counsel at Facebook.
Shares of Coinbase climbed as much as 13% on Wednesday in its hotly anticipated trading debut on the Nasdaq.
The direct listing had a $250-per-share reference price, and opened at $381 before hitting an intraday high of $429.54, which was 13% above its opening price.
The $381-per-share opening price put Coinbase’s valuation at $99.5 billion, giving it a bigger market capitalization than such established US companies as General Motors, FedEx, and Gilead Sciences.
Coinbase is the first major cryptocurrency exchange to go public, and investors see its direct listing as a major milestone for bringing cryptocurrencies in the mainstream. Bitcoin hovered near an all-time high above $63,000 when trading commenced, having hit a record of $64,869.77 earlier in the day.
“We look at the Coinbase listing as an additional validation of the space, and a major PR opportunity for the entire industry to shine as the future of finance,” said Alex Mashinsky, CEO and co-founder of Celsius, a cryptocurrency yield-earning platform.
He added: “Coinbase has more users and more revenues than many of the largest Wall Street players and is more profitable than any major exchange, this validation puts most skeptics at a crossroads having to re-evaluate their denial and frustration with the disruption coming at them from all sides.”
David Trainer, New Constructs CEO, said in a stock research note that Coinbase’s $100 billion 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.
In the earnings report, the company warned that its financial results have fluctuated drastically on swings in crypto trading volume-something investors should keep an eye on, Trainer said.
“Trading volume, and therefore transaction revenue currently fluctuate, potentially materially, with Bitcoin price and crypto asset volatility. This revenue unpredictability, in turn, impacts our profitability on a quarter-to-quarter basis,” Coinbase acknowledged in its prospectus.
Coinbase CEO Brian Armstrong said on Wednesday that the company will diversify its revenue stream away from transaction fees over the next five to 10 years.
According to a company filing, 96% of the company’s sales in 2020 came from fees it charged users. He anticipates that will decline to around 50% as new revenue streams like credit cards and staking services grow. Armstrong also said users can expect fee compression over the long term.
“We’ve started to monetize a number of things,” he told CNBC in an interview on Wednesday, detailing a number of examples. “And my guess is that in five or 10 years, you’ll see them being maybe even 50% or more of our revenue.”
Currently, Coinbase is the largest cryptocurrency exchange in the US, and offers a wide variety of products including custodial accounts for institutions, digital wallets for retail investors, as well as its own US dollar stablecoin.
In 2019, the professional platform of Coinbase updated its fee structure by increasing some maker fees as high as 233%, as reported by CoinTelegraph. Coinbase then amassed $1.1 billion in direct revenue following this change in 2020, more than double the $482 million revenue it made in 2019.
Coinbase is going public via direct listing on the Nasdaq on Wednesday, viewed by many cryptocurrency bulls as a milestone for the digital currency ecosystem.
“Coinbase’s listing is for crypto what Google’s IPO was for the internet,” Antoni Trenchev, co-founder and managing partner of Nexo, a regulated financial institution for digital assets with over $12 billion in assets under management, told Insider. “Just over 15 years on, it’s hard to imagine life pre-Google.”
Bitcoin hit an all-time high for the second day running on Wednesday as excitement around the direct listing of exchange Coinbase helped push the cryptocurrency close to $65,000.
A rise of 2.6% took bitcoin as high as $64,870, before it pared its gains to trade at $63,709 at 9.15 a.m. ET.
Commentators said the latest leg higher has been driven by the Coinbase direct listing on the Nasdaq on Wednesday, which is set to be the first time a major cryptocurrency company has gone public.
Coinbase’s volatile revenues make it hard to value, but estimates have been as high as $100 billion. Nasdaq set a reference price of $250 a share on Tuesday, although it could trade much higher, given that shares changed hands for $350 in a private auction in March.
“I expect record-breaking demand for this IPO,” said Richard Johnson, chief executive of technology focused investment firm Texture Capital. “The valuation from private market trades was $90 billion, but this was before Coinbase announced their blowout Q1 numbers.”
He added: “Medium to long term, I see COIN [Coinbase’s ticker] becoming a proxy for crypto exposure until the ETFs start getting approved.” An ETF is an exchange-traded fund.
Richard Johnson, chief executive of technology focused investment firm Texture Capital, said: “I expect record-breaking demand for this IPO.” He added: “Medium to long term, I see COIN becoming a proxy for crypto exposure until the ETFs start getting approved.”
Vitaliy Kedyk, head of strategy at Currency.com, said: “This listing along with the BTC ETFs will attract a lot of institutional money, fueling the entire industry forward.”
However, some commentators have warned a disappointing public listing could knock confidence in crypto.
Edward Moya, senior market analyst at currency firm Oanda, said on Monday there is a risk that “a disappointing IPO or excessive concerns over enhanced regulatory oversight could weigh on bitcoin and the other altcoins.”
More broadly, massive amounts of monetary and fiscal stimulus have powered the bitcoin surge over the last 6 months, analysts say. The cryptocurrency has more than doubled in 2021 and is up around 830% from a year ago.
Institutional interest has also been a key part of the story, with major companies such as Tesla, JPMorgan and BNY Mellon getting involved.
Bitcoin rose as much as 2.6% to $61,229 on Monday as the crypto world prepared for a week dominated by Coinbase’s direct listing on Wednesday. The surge took the coin close to its all-time high of $61,742 reached on March 13.
The world’s biggest cryptocurrency has since pared gains slightly, trading at $60,429.68 as of 9:05 a.m. in New York.
“There’s a lot of anticipation, some restlessness, maybe some anxiety in crypto markets today,” Justin d’Anethan, head of sales at Nasdaq-listed exchange Equos, told Insider.
“With BTC solidly in the upper 50Ks, everyone is looking to see if we can reclaim or surpass that last all-time high… seen a couple of weeks back,” he said.
It will be the first listing of a major crypto company, with Coinbase pulling in around $1.8 billion of revenue in the first quarter of 2021. The exchange said private market transactions valued the firm at about $68 billion in March.
D’Anethan added: “Coinbase’s IPO is definitely a supportive move for the space as it is bolstering the legitimacy of the asset class and offering investors new ways to interact with it.”
Edward Moya, senior market analyst at currency firm Oanda, said in an email “a disappointing IPO or excessive concerns over enhanced regulatory oversight could weigh on bitcoin and the other altcoins.”
Bitcoin has more than doubled in 2021 thanks to a renewed interest in digital currencies supported by huge amounts of stimulus from governments and central banks.
On the back of the eye-popping earnings, DA Davidson analyst Gil Luria increased his price target by 125% to $440 from $195. The analyst derived his adjusted price target from a 20x multiple based on the company’s expected revenue this year.
The record-breaking quarter for Coinbase moved in lockstep with bitcoin’s surge, which thus far has soared more than 100% year-to-date and 600% in the past 12 months.
Coinbase, the largest cryptocurrency exchange in the US, offers a wide range of products and services from trading and custody services to offering a stablecoin pegged to the US dollar. It has 43 million users in more than 100 countries.
Here’s what eight crypto-industry experts had to say about Coinbase’s public debut:
“The direct listing of Coinbase is a huge market signal, however, we’re yet to see whether the long-term effect on the crypto industry will be positive or negative … We are big fans of what Coinbase has done to date, but we worry about the centralizing effects of the concentration of users on a single platform, negating the true benefits of decentralization.” – Alberto Jauregui, growth lead of Pocket Network, a blockchain data ecosystem
“The Coinbase listing is a huge step for the digital asset industry from both a mainstream adoption and regulatory point of view, signifying the acceptance of cryptocurrency business in traditional finance. Other exchanges following in Coinbase’s footsteps are entirely based on their readiness to go public. This will pave the way for Coinbase’s competitors to join the IPO movement. Kraken will most likely be next.” – Gunnar Jaerv, COO of First Digital Trust, a leading digital asset custodian in Hong Kong
“The success of Coinbase and its direct listing will bring on the next wave of new users to cryptocurrencies by continuing to solve the challenges of owning, storing, and providing custody to digital assets. This public listing will also have an enormous impact on the entire digital asset industry by opening the gate to further Wall Street and institutional investment and confirming that the future of finance is decentralized.” – Leo Cheng, co-founder and project lead at C.R.E.A.M. Finance, a decentralized lending protocol
“Going public is stepping into the big leagues. Crypto is becoming part of the traditional finance sector … This level of adoption seemed like a dream scenario just a year ago. A lot of users still keep funds on Coinbase and look at it as merely a trading platform. But more are beginning to wake up and understand that Coinbase is an important gateway to getting started in the crypto sector.” – Kadan Stadelmann, CTO of Komodo, an open-source technology workshop and blockchain solutions provider
“When we entered into the market three years ago it was a new and novel industry, everyone had to wrap their heads around what we were doing as a business, the terminology we were using, and the potential value a bitcoin mining operation could hold. People saw us as a speculative gamble. This year we are seeing people move beyond that. Crypto is not a novel thing anymore, but the hot new asset class for equities.” – Emiliano Grodzki, CEO of Bitfarms, a global public bitcoin mining operation
“The growth and expansion of cryptocurrencies had always been at odds with the interests of traditional financial systems … The Coinbase direct listing unites these two sides of finance in the success of this licensed and regulated company. Traditional investors who purchase Coinbase stock will indirectly speculate on the crypto market and similarly, crypto traders who own Coinbase stocks will have a vested interest in the success of the company.” – James Anderson, CEO of RioDeFi, an ecosystem of interoperable financial products
“The Coinbase direct listing is going to further build credibility and legitimacy for the cryptocurrency markets, which have already received huge institutional interest and flows since the start of 2021. But once the celebrations settle and the mainstream awareness of the cryptocurrency markets grow, eyes will turn to the alternative burgeoning decentralized financial (DeFi) industry and structures like DAOs (decentralized autonomous organizations) will become common knowledge.” – Samantha Yap Founder and CEO at YAP Global, a PR agency specializing in crypto, blockchain, and fintech
Coinbase Global, the largest cryptocurrency exchange in the US, on Wednesday revealed that the company now has a valuation of $68 billion ahead of its planned direct listing due in large part to recent private transactions, Reuters first reported.
The increased valuation signifies how much the company’s value has surged alongside the huge rally in the price of bitcoin, which hit record highs in March. The company in a regulatory filing that Reuters first reported said its shares in the private market traded at an average price of $343.58 per piece in the first quarter of 2021, a massive rise from $28.83 per piece in the third quarter of 2020.
If the filing is approved by regulators, it will mark a significant milestone for the digital currency ecosystem that has sometimes struggled to earn the confidence of more conservative regulators and investors. D.A. Davidson analysts in early March said the listing is crucial since it symbolizes the convergence of cryptocurrency and traditional finance.
D.A. Davidson analysts led by Gil Luria also added that 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.”
The San Francisco-based company, however, did not indicate if the US has authorized it to trade cryptocurrencies, which the government classifies as securities. Founded in 2012, Coinbase has registered roughly 114.9 million shares for its direct listing.
On Wednesday, Coinbase CEO and co-founder Brian Armstrong published a post on Reddit, asking people for comments and questions about his company, the valuation, its future financial performance, and cryptocurrencies as a whole. Armstrong and other executives will host an “Ask me anything” session on the social media platform through Friday at 10 pm ET.
Coinbase has 43 million users in more than 100 countries. Its competitors include Grayscale, Kraken, and Gemini, as well as broader consumer digital wallets like Square, PayPal, and Robinhood.