Crypto and Coinbase Bull Run Call. Share price seen tripling.
Coinbase Global has scored a consensus-shattering upgrade, with one analyst seeing a case for shares of the cryptocurrency broker to tear nearly three times higher amid a new bullish streak in the price of
Bitcoin
and other digital assets.
Bo Pei, an analyst at US Tiger Securities, upgraded Coinbase (ticker: COIN) to Buy from Hold, and raised his price target on the stock to $200 from $65 – becoming by far the most bullish of more than 20 analysts surveyed by FactSet. Shares in Coinbase closed at $75.14 on Tuesday, and the last time the stock was above $200 was a year ago.
“Crypto has started another bull run and so has Coinbase,” Pei said in a Monday note. “We believe crypto price is the main factor to consider when investing in Coinbase. We believe a crypto bull market will drive significant revenue growth.”
In fact, crypto prices have proven to be a key factor for Coinbase stock, for several reasons. Not only is Coinbase a stock that often moves in tandem with the price of Bitcoin, but the core of the broker’s business – despite increasing efforts to diversify – remains rooted in fee-based crypto trading. Bull markets see the core audience of retail investors flocking to buy digital assets, while bear markets, like the current one, push investors away and see revenues fall.
And digital assets are on an impressive winning streak. While Bitcoin remains well below its late-2021 high near $69,000, the biggest crypto has rallied around 70% so far this year from the depths of a bear market to its highest price since June 2022, when the crypto crash accelerated with a series of bankruptcies.
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“Our thesis assumes that a new crypto bull market has begun and Coinbase’s revenue and profits can recover to 2021 levels, when Coinbase traded above $200,” Pei said. The analyst also pointed to historical trends in Bitcoin price movements – including anticipation of the next “halving” that reduces Bitcoin issuance – as further evidence of the bullish streak, along with upside for Ether prices.
Nevertheless, Pei sees some risks for Coinbase, including regulation. US lawmakers and regulators have been looking much harder at crypto companies over the past year, and scrutiny has only accelerated following the collapse of FTX and the collapse of two banks that served the digital-asset industry.
The implosions of Silvergate Capital and Signature Bank were initially a setback for crypto prices, but turned out to be just part of a larger banking panic that has gripped the US and turned out to be a surprising tailwind for Bitcoin.
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“The recent Bitcoin rally following the Silicon Valley Bank crisis suggests that investors have begun to recognize Bitcoin’s value as a decentralized and transparent resource,” Pei said. That puts the analyst in the camp of bulls who see the recent price rise as evidence that traders are flocking to Bitcoin as a result of the principles of financial decentralization – although there may be something else at play.
Stress over the banking sector has been an unintended consequence of the Federal Reserve raising interest rates over the past year in an effort to curb inflation – a trend that has also hit Bitcoin. With cracks appearing in the banks, traders now expect the Fed to be much more accommodative and even see a situation where interest rates are cut this year, which would be a boost to prices.
That doesn’t change Pei’s thesis that Coinbase will benefit from another crypto bull run, but rather underscores how vulnerable Bitcoin as well as Coinbase — like so many tech stocks — are to the shifting winds of US monetary policy.
Write to Jack Denton at [email protected]
