Coinbase Gets Upgrade: Analyst Highlights Larger Audience, New Spot ETFs, Less Focus On Meme Coins

BofA Securities analyst Mark McLaughlin upgraded Coinbase Global, Inc (NASDAQ:COIN) to Neutral from Underperform, raising the price forecast to $217 from $110.

According to the analyst, the upgrade was driven by retail reengagement of crypto and operating leverage following prior expense cuts. Risks, however, included ongoing regulatory overhang and near-term dependence on transaction revenue for profitability.

Per the analyst, the current macro environment has been a positive for cryptocurrency market cap appreciation and trading volumes.

The present market situation is more robust given the larger audience of investors, including institutional, new spot ETFs, and more maturation of brokerage services.

The market also gained from a greater focus on a concentrated set of mature coins (top 10 coins make up 83% of market cap vs. 73% in November 2021) with less focus on meme coins.

Coinbase’s expense discipline and ability to benefit from operating leverage following significant expense cuts in 2022 will help it maintain profitability in the future, the analyst wrote.

Over the 2022-2023 “crypto winter,” Coinbase significantly reduced its cost base to more appropriate levels, aiming to reach profitability amidst a precipitous decline in transaction volumes and revenue.

In addition, increased diversification of revenue sources less correlated with overall volumes should dampen earnings volatility.

The analyst did warn about regulatory overhang surrounding U.S. Securities and Exchange Commission lawsuit and timeline. While the analyst does not see any major update for the rest of the year but expects a trial in 2025 that will add more clarity on future regulation.

COIN Price Action: Coinbase shares are trading higher by 5.31% to $209.74 at last check Friday.

Photo Rafapress on Shutterstock