Coinbase Stock: A ‘Scarce’ Asset Worth $75, NY Investment Bank Says

Crypto’s year-long winter is finally over with the market “likely” having entered into bitcoin’s next bull cycle — potentially fuelling crypto-related equities — according to one New York-based investment bank.

H.C. Wainwright said Wednesday this year’s rally in digital assets was a positive sign, with the potential for significant growth in total market cap, trading volumes and incremental user adoption.

“The market has taken a more risk-on approach over the past quarter,” Miguel Morel, CEO of Arkham, told Blockworks. “The direction of the space is much more optimistic overall, and the growth is starting to show in on-chain metrics as well as asset prices.”

That would play well into the hands of investors betting big on the likes of Coinbase stock (COIN), the bank said in a research note obtained by Blockworks. COIN last traded at $53 per share, down about 23% over the last seven days, but up roughly 60% year-to-date.

Transaction revenues “account for 75% of total net revenues and grew an exponential 524% year-over-year in the 2021 bull market,” the bank said.

Wainwright, a mid-sized bank, offers a variety of services, including equity research, institutional sales and trading, investment banking and wealth management.

Target price for Coinbase stock

The bank’s $75 target for COIN is based on its analysis utilizing a multiple of 5.5x enterprise  value to revenue ratio, based on the exchange’s estimated net revenue of $2.89 billion in 2023. 

“We view COIN as a scarce asset, as Coinbase is the only publicly listed crypto native company in the US with a market cap in excess of $10 billion,” the bank said. “Competition for investor capital is extremely limited.”

Wainwright observes that the scarcity value of Coinbase is unlikely to change in the near term, given the current regulatory environment for crypto.

But Owen Lau, executive director at Oppenheimer, sees that environment as a risk for the company. “I think the higher price for bitcoin and other digital assets help Coinbase, but at the same time there is still a lot of risk coming from regulatory uncertainty for Coinbase,” Lau told Blockworks.

“I hope we will see sensible bills coming out from the Congress and providing the industry a much needed regulatory clarity,” he added.

A trend of hostility to native crypto firms seeking to establish a presence across the US has encouraged major players, namely Coinbase and Gemini, to seek alternative jurisdictions.

Last month, Coinbase was hit with a Wells notice from the SEC over alleged securities violations. Chair Gary Gensler has been heavily criticized for throwing the rule book at budding and established crypto firms attempting to navigate opaque and half-baked regulations.

The exchange has hit back, filing suit earlier this week, in an attempt to force the agency’s hand on behalf of the industry.

As the cryptocurrency market continues to evolve, Coinbase’s ability to adapt to changing market conditions and regulatory requirements will be critical to its long-term success, the bank said. 

Several catalysts could further drive Coinbase’s growth, according to Wainwright, including greater regulatory clarity in the US and upward estimate revisions driven by the continuation of the crypto market’s bullish price action this year.

Oppenheimer’s Lau said he sees investors “taking a cautious view.”

“I do see the sentiment has slightly improved since FTX, but trading volume is still lower than last year despite increasing bitcoin price…Until we see more engagement from investors and higher trading volume, I wouldn’t characterize crypto winter has finally abated,” he said.


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Source: https://blockworks.co/news/coinbase-stock-scarce-asset