Coinbase: Why are JPMorgan and Goldman Sachs upbeat?

US crypto trading platform Coinbase Global received bullish coverage from Wall Street research teams this week, despite its sluggish share price.

  • Coinbase Global Inc (Nasdaq: COIN) share price dips to US$241.52
  • JPMorgan believes the exchange has ample growth opportunities
  • Analysts on average targeted Coinbase to hit US$390.27 per share
  • Buy and sell Coinbase stocks with an IG account

Will Coinbase’s stock price rebound soon?

Shares of newly listed Coinbase Global, the biggest US cryptocurrency exchange, inched down by 0.4% to close at US$241.52 on Wednesday (26 May 2021)

The cryptocurrency exchange’s stock has struggled to advance in recent weeks, weighed down by the extreme price volatility and recent bloodshed of Bitcoin and other digital tokens.

Since their first day of trading, on 14 April 2021, the shares have tumbled about 26.4%.

Still, out of 15 research teams, 11 recommended ‘buy’ and four said to ‘hold’ as of Thursday. On average, their 12-month target prices stood at US$390.27 per share, according to Bloomberg data.

Mizuho analysts recommended ‘neutral’ while slashing their price target to US$225, from US$315. They cited increased risks of a ‘crypto winter’, which occurs when prices of digital coins remain at low levels after crashing.

The recent plunge in cryptocurrency prices had put this major downside scenario on the table for Coinbase, Mizuho noted.

Why are some analysts optimistic about Coinbase?

JPMorgan’s research team this week initiated coverage on the exchange with an ‘overweight’ rating alongside a US$371 target price.

Despite the stock’s recent weakness and crypto price swings, JPMorgan kept a bright outlook as it likes Coinbase’s pole position in the market, and foresees COIN shares clawing back their losses amid sustained growth of the crypto market.

The company has organic and inorganic growth opportunities, although any success will depend on hiring the talent needed to develop and acquire ‘the best’ in crypto, the research team added.

The exchange also could expand into areas where traditional brokers have better monetised their business, for instance to grow in crypto-cash management, derivatives, lending, and advice, JPMorgan analyst Kenneth Worthington wrote.

Meanwhile, Goldman Sachs likewise initiated coverage on Coinbase, giving a ‘buy’ call and eyeing US$306 per share.

The stock provides ‘the best way to gain exposure to the expansion of the crypto-native ecosystem’, Goldman Sachs analysts said earlier this week.

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

Bloomberg Intelligence (BI) analysts pointed out that with cryptocurrency adoption still in its early stages, there is potential for triple-digit growth as Coinbase expands to institutional clients, who will bring ‘recurring fees, liquidity, and stability’ as compared to retail clients.

‘Newer competitors such as Square, PayPal and Robinhood may pressure pricing, but we believe Coinbase's scale, technology and compliance back its early-mover advantage,’ BI added.

Coinbase CFO Alesia Haas recently maintained the company’s bullish second-quarter guidance, saying that ‘the momentum that we are seeing is continuing’ and there remains ‘a lot of interest in crypto’.

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