Shares in
Coinbase Global
rallied on Friday after the cryptocurrency broker received a rare thumbs-up from a Wall Street analyst.
Coinbase stock gained 2% to around $125 after Oppenheimer analyst Owen Lau raised his rating on the shares to Outperform from Perform with a price target of $160. The stock has fallen more than 25% this year after more than tripling in value in 2023. It took off as crypto rose out of a bear market and anticipation built around the approval of spot
Bitcoin
exchange-traded funds.
Few analysts still favor the stock after those red-hot gains. Among other challenges, the company faces allegations from the Securities and Exchange Commission that could upend the business. The average rating for Coinbase stock among analyst tracked by
FactSet
is at Hold.
Few have raised their targets for the stock price in recent months, even as the stock has marched higher.
J.P. Morgan
even downgraded Coinbase this week.
“Coinbase is still standing and fighting for its businesses and the industry,” Lau wrote in a Thursday note. “We believe the company is stronger than many people realize, and the management team is tougher than most investors think.”
The SEC alleges that Coinbase operates as an unregistered securities exchange, a significant threat to a group whose core business remains crypto trading. Coinbase denies that it offers securities and is fighting the SEC in court in a battle that is likely to set a precedent across the digital asset space.
“Either Coinbase will prevail in SEC lawsuit or the court will dismiss it,” Lau predicted. That is a key pillar in any bull case for the stock because the SEC’s lawsuit targets a major moneymaker for Coinbase: trading in smaller, non-Bitcoin tokens.
Lau is also positive on spot Bitcoin ETFs and their impact on the company. Coinbase is the custodian of many of the newly launched crypto ETFs, but there remain concerns that low-fee funds could cannibalize some of the broker’s fee-based trading business.
“Coinbase’s fundamentals are in upward trajectory…the long-term competitive position of Coinbase remains strong,” Lau said, pointing to what he said were multiple factors that can aid the company in both the near and long term.
The assumptions for a continued rally in Coinbase, Lau said, include market-share gains in U.S. and global spot crypto trading, continued premium pricing power given the company’s brand and compliance infrastructure, and additional crypto ETF products, such as proposed funds that would hold
Ether.
The analyst added that interest-rate cuts in the U.S., a change to Bitcoin’s issuance known as the “halving,” and further crypto adoption “can boost the top and bottom lines for Coinbase over the next two years.”
Now let’s see if more on Wall Street follow.
Write to Jack Denton at [email protected]
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