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.
Coinbase stock could climb 22% from current levels because the company is a “one-stop shop” crypto ecosystem, according to Wedbush analysts.
In a note to clients on Wednesday, analysts led by Moshe Katri initiated coverage on Coinbase Global with an “outperform” rating and a $275 price target.
The price target represents a potential 22% increase from Wednesday’s closing price of $224.80.
“We view COIN as a “one-stop shop” platform, enabling roughly 56MM retail users, 8,000 institutions, and 134,000 ecosystem partners in over 100 countries to participate in the crypto economy,” Katri wrote.
Katri and a team of Wedbush analysts went on to describe four factors that give them confidence in Coinbase stock moving forward.
First, they detailed Coinbase’s “first-mover” advantage. The analysts said that Coinbase is the “default starting place for new user journeys into the crypto economy” and noted that over 90% of retail users enter the platform organically or through word-of-mouth.
The second factor that the Wedbush analyst said gives them confidence in Coinbase is the company’s dominant and growing share of crypto assets.
According to Coinbase’s SEC filings, the company holds 11.3% of the entire crypto market capitalization.
The third factor that Wedbush’s Katri highlighted in his note to clients was the integration of blockchain technology and traditional finance on Coinbase that enables cryptocurrencies to become part of the payments eco-system.
According to Wedbush, COIN “creates trusted and easy-to-use products, crypto assets that can be dynamically transmitted, stored, and programmed to serve the needs of an increasingly digital and globally interconnected economy.”
Finally, Wedbush analysts highlighted the growing diversification of revenue streams at Coinbase as a bullish factor for the stock.
Coinbase has moved to create an entire web of ancillary services tied to the crypto market. For example, customers can now borrow cash using bitcoin as collateral on the platform.
Wedbush’s analysts also noted that in the first quarter, on average, 25% of retail users who invested in cryptocurrencies on Coinbase also engaged with at least one non-investing product.
The Wedbush team arrived at its $275 price target for Coinbase by using a 22.7x multiple on 2022’s earnings, assuming a 20% growth rate for revenue and EPS.
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 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.
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.
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.”
A light economic calendar will “leave plenty of time for investors to watch the debut of Coinbase to the public markets. The listing couldn’t come at a better time for the company as crypto-currencies have been on absolute fire with both bitcoin and ether trading at record highs and riding what looks to be their seventh straight day of gains,” said Paul Hickey, co-founder of equity research firm Bespoke in a note.
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 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.