Coinbase's Strength Underestimated, says Oppenheimer Upgrade

• Coinbase Stocks Rise Following Oppenheimer's Optimistic Review
• Stronger in the Wake of Crypto Winter
• The Basis of the Upgrade
• The Effect of a Recent Downgrade
• Trade Volume Expected to Increase
• A Look at the Past and Future Performance
• Profitable Prospects for Coinbase

Coinbase Stocks Rise Following Oppenheimer's Optimistic Review

On Friday, Coinbase (COIN) saw a surge of as much as 6% in stock prices. This came in the wake of investment bank Oppenheimer's decision to upgrade the rating of the stock to outperform from its previous perform status. The bank has also set a price target of $160 per share. Oppenheimer firmly believes in the solidity of the company and the resilience of its management team.

Stronger in the Wake of Crypto Winter

According to analyst Owen Lau's note, Coinbase endured rigorous examination during the crypto winter. Despite many of its peers failing, Coinbase remained resilient and continued to fight for its businesses and the industry as a whole. Lau believes that the company's strength and the hardiness of its management team is underestimated by many.

The Basis of the Upgrade

The upgraded rating is attributed to a host of factors. Among these is the possibility that Coinbase will emerge victorious from its lawsuit against the Securities and Exchange Commission (SEC), or that the case will be dismissed. A contributing factor to the stock's positive review is the recent approval of ten spot bitcoin exchange-traded funds (ETFs). Coinbase serves as a custodian for multiple issuers of these ETFs. This involvement not only generates revenue for the company but also paves the way for a new wave of investors, increased adoption, and higher trading volume, as suggested by Lau.

The Effect of a Recent Downgrade

The decision to upgrade came after JPMorgan chose to downgrade the stock to an underweight rating earlier in the week, on account of an anticipated disappointing bitcoin ETF catalyst. Despite the current low trading fees for the ETFs, some as low as 0% for the first six months or until the fund reaches a predetermined asset amount, Lau does not foresee investors diverting their funds from crypto exchanges to the ETFs. Rather, he expects the majority of retail traders to retain their funds on the exchange, enabling them to tap into other blockchain use cases.

Trade Volume Expected to Increase

Lau highlighted that Coinbase's trading volume has seen a significant increase since the beginning of the year. He predicts that this volume is set to rise even more over the next two years. This is expected in light of the Federal Reserve's plans to decrease interest rates this year, and the industry's anticipation of the bitcoin halving in April. According to Lau, trading volume may increase by as much as 66% year-over-year.

A Look at the Past and Future Performance

Last year, Coinbase shares saw a whopping increase of over 400%, propelled by the broad recovery of the crypto market following a tumultuous 2022. However, the stock has dropped by over 20% this year, performing worse than the broader crypto market. The source 20 index, which monitors the 20 largest crypto assets, indicates a decline of around 11% year-to-date.

Profitable Prospects for Coinbase

Despite this, Lau maintains a positive outlook for the year ahead. He predicts a high likelihood that Coinbase will achieve profitability for the first time since Q4 2021. He estimates a year-over-year growth rate of 25%.

Edited by Jonathan Stoker