Analyst Upgrades Coinbase Stock, Forecasts Impressive Year Ahead

Canaccord Genuity's Joseph Vafi raised their price target on Coinbase (NASDAQ: COIN) by 16.7% from $240 to $280 on 2024/05/03. The analyst maintained their Strong Buy rating on the stock.

Vafi's price target revision came after Coinbase reported its Q1 2024 earnings on May 2nd. In a note to investors, Vafi highlighted the company's aggressive and thoughtful approach to gaining market share in both favorable and challenging crypto market conditions. The analyst also expressed encouragement for Coinbase's layer 2 blockchain, Base, which has seen initial traction.

Coinbase's Q1 2024 financial results were impressive. The company reported earnings per share (EPS) of $1.65, surpassing the Zacks Consensus Estimate of $1.04 and significantly higher than Q1 2023's $0.15. Revenue for the quarter reached $1.64 billion, beating the Zacks Consensus Estimate by 29.55% and showing substantial growth compared to Q1 2023's $772.53 million. Adjusted EBITDA also saw a significant increase, reaching $1.014 billion, up from Q1 2023's $287 million.

Looking ahead to Q2 2024, Coinbase management provided guidance on various financial metrics. They expect Q2 subscription and services revenue to be within a range of $525 million to $600 million, assuming crypto asset prices remain in their current range. Transaction expenses are projected to be in the mid-teens as a percentage of net revenue. Technology & development and general & administrative expenses are expected to range from $660 million to $710 million, primarily driven by higher trading volumes and associated expenses. Sales & marketing expenses are estimated to be between $150 million and $180 million, influenced by increased USDC customer rewards and higher NBA spend.

In a Letter to Shareholders, Coinbase management expressed satisfaction with the company's Q1 performance. They highlighted achievements in driving revenue, utility, and regulatory clarity. Notably, Coinbase's market share in US spot and derivatives markets increased, and they reached all-time highs on Coinbase Prime. The company's international business also contributed significantly to its growth. Coinbase's Layer 2 solution, Base, was emphasized as a means to expand the utility of cryptocurrencies by improving network speed, stability, and empowering builders to innovate on-chain. The company also reaffirmed its commitment to driving regulatory clarity for the crypto industry through advocacy, legislation, and legal efforts.

Following Vafi's rating revision, other analysts also updated their outlook on Coinbase on May 3rd. Goldman Sachs's Will Nance lowered their price target from $295 to $255, maintaining a Hold rating on the stock. Keefe, Bruyette & Woods's Kyle Voigt raised their price target from $230 to $240, also maintaining a Hold rating. Needham's John Todaro lowered their price target from $275 to $260, but maintained a Buy rating.

According to data from WallStreetZen, 54.5% of top-rated analysts currently rate COIN as a Strong Buy or Buy, while 36.4% consider it a Hold. Only 9.1% of analysts recommend or strongly recommend selling the stock.

The consensus forecast among analysts is that Coinbase's upcoming year will deliver earnings per share (EPS) of $3.36. If these predictions hold true, COIN's next yearly EPS will be down by 39.7% compared to the previous year.

In terms of stock performance, Coinbase's share price has declined by 6.3% since the release of its latest quarterly report on May 2nd. However, the stock has seen a remarkable year-over-year increase of 268.9%. During this period, Coinbase has outperformed the S&P 500, which has risen by 25.4%.

Coinbase Global, Inc. is a leading provider of financial infrastructure and technology for the crypto economy, operating both in the United States and internationally. The company offers a range of services, including primary financial accounts for retailers, a marketplace for institutional trading in crypto assets, and technology and services for ecosystem partners to build crypto-based applications and accept crypto assets as payment. Founded in 2012 and headquartered in Wilmington, DE, Coinbase is at the forefront of the rapidly evolving cryptocurrency industry.

Joseph Vafi, the analyst who raised Coinbase's price target and maintained a Strong Buy rating, is ranked in the top 5% of Wall Street analysts by WallStreetZen. With an average return of 14% and a win rate of 49.1%, Vafi specializes in analyzing the Industrials, Technology, and Financial Services sectors.

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