Analysts cite increased trading volume, the recent approval of spot bitcoin ETFs, and a potential victory in the company’s lawsuit against the SEC as the primary reasons for the upgrade.
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Coinbase’s (COIN) shares saw an increase of up to 6% on Friday following an upgrade from investment bank Oppenheimer. The firm changed the stock’s rating to “outperform” from “perform” and set a price target of $160 per share. The upgrade was based on the belief that Coinbase is resilient and its management team is exceptionally strong.
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During the challenging period of ‘crypto winter’, when the stock faced intense scrutiny and many similar companies struggled, Coinbase remained resilient. Analysts have noted, “COIN stood its ground, actively defending its business and the broader industry. We are of the opinion that the company’s strength and the tenacity of its management team are underappreciated by many.”
The upgrade is based on a number of factors, including a “good chance” that Coinbase will prevail in its lawsuit against the Securities and Exchange Commission (SEC) or that the court will dismiss the case.
Another motivating factor is the recent approval of ten spot bitcoin exchange-traded funds (ETFs), for which Coinbase acts as custodian for several issuers. This will not only generate revenue for the company as a key component of the infrastructure, but will also benefit from a new wave of investors, increased adoption, and higher trading volume, according to Bir.
The upgrade comes after JPMorgan downgraded the stock to underweight earlier this week, citing a disappointing bitcoin ETF catalyst.
With current low trading fees for ETFs – some at 0% for the first six months or until the fund reaches a certain amount of assets – investors trading on crypto exchanges may be swayed to invest in ETFs rather than platforms like Coinbase, but Lau does not see this happening. Instead, he believes that the vast majority of retail traders will keep their funds on the exchange because it allows them to participate in other blockchain use cases.
Bir also noted Coinbase’s increased trading volume since the beginning of the year, and predicts that volume will continue to rise over the next two years as the Federal Reserve looks to cut interest rates this year and the industry prepares for the bitcoin halving in April. According to Bir, trading volume could increase by up to 66% year over year.
Coinbase’s stock increased more than 400% last year, fueled by a broader crypto market recovery following a turbulent 2022. The stock has fallen more than 20% this year, underperforming the overall crypto market. The CoinDesk 20 index, which tracks the 20 largest cryptocurrency assets, is down roughly 11% year to date.
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