Coinbase Upgraded by Oppenheimer as Crypto Exchange Stronger Than Many People Realize

Shares of Coinbase (COIN) experienced a 6% increase on Friday following an upgrade in the stock rating by investment bank Oppenheimer. The bank raised the rating from “perform” to “outperform” and set a price target of $160 per share. Oppenheimer analyst Owen Lau expressed confidence in the company’s strength and the resilience of its management team, stating, “The stock was under extreme scrutiny during crypto winter. While many peers went under, COIN is still standing and fighting for its businesses and the industry. We believe the company is stronger than many people realize, and the management team is tougher than most investors think.”

The upgrade was based on several factors, including the likelihood of Coinbase winning its lawsuit against the Securities and Exchange Commission (SEC) or the court dismissing the case. Additionally, the recent approval of ten spot bitcoin exchange-traded funds (ETFs), for which Coinbase serves as a custodian, was seen as a driving force. Lau explained that this development would not only generate revenue for Coinbase but also attract a new wave of investors, leading to increased adoption and higher trading volume.

Oppenheimer’s upgrade came shortly after JPMorgan downgraded Coinbase’s stock to an underweight rating, citing a disappointing bitcoin ETF catalyst. The low fees associated with trading ETFs, some of which offer 0% fees for the first six months or until a certain asset threshold is reached, could potentially divert investors from trading on platforms like Coinbase. However, Lau dismissed this concern, stating that the majority of retail traders would likely continue to use Coinbase due to its ability to engage in other blockchain use cases.

Lau also highlighted the higher trading volume that Coinbase has experienced since the beginning of the year and predicted that it would continue to increase over the next two years. He attributed this growth to the Federal Reserve’s potential interest rate cuts and the anticipation surrounding the bitcoin halving in April. Lau estimated that trading volume could increase by as much as 66% year-over-year.

While Coinbase’s shares rose by over 400% in 2023, driven by a broader crypto market recovery, they have declined by more than 20% this year, underperforming the overall crypto market. However, Lau believes that Coinbase has a good chance of becoming a profitable company in the year ahead, estimating a 25% growth year-over-year.

Overall, Oppenheimer’s upgrade of Coinbase’s stock reflects optimism in the company’s strength, the potential resolution of its legal challenges, and the opportunities presented by the growing popularity of bitcoin ETFs.