Coinbase Global (COIN) landed its first ‘buy’ rating today as the overall stock market lags. The crypto giant landed its “first-ever bullish analyst recommendation this week.” With the crypto market picking up steam and considering just how much Bitcoin Coinbase has in its reserves, the COIN stock may be in for a major 4th quarter, and clearly, the analysts agree. The crypto market has taken a hit in September, which was not a surprise.
COIN has still been hovering around the lower end of the 52-week range but today is trading up today nearly 5% and climbing. The price would likely even be higher if it wasn’t for a reported exploit on the platform that was revealed today, with Coinbase saying they have “immediately fixed the flaw.”
COIN started September around $280, and now sitting at $232, could certainly reclaim $280 and go much higher, especially if Bitcoin does big numbers this quarter as many have suspected. JMP Securities gave COIN their first ‘Buy’ rating Friday afternoon, and sure enough this morning, Bitcoin’s price action has taken COIN up with it. The firm set a target price at $300 for the short term.
Devin Ryan, research analyst at JMP told Yahoo finance that regarding Coinbase: “I can’t think of any other company with 70 million customers that generates roughly $7 billion in revenues that’s in its first or second inning as a business.” He went on to say that 85% of their revenue comes from trading activity and that they are building out a number of areas that could “become even larger than their trading business.”
Others are paying attention, too. Cathie Wood of Ark invest “bought over $42 million Coinbase shares this week.” Meaning that Ark has a total of over $1 billion in COIN shares. Coinbase has basically been trading in line with Bitcoin and follows Bitcoin’s price action, as the below chart indicates. This makes sense, however, Coinbase is cashing in from selling volume, and buying volume, of course. But it appears that a strong BTC means a strong COIN.
Coinbase also cashes in through any of the crypto’s offering a staking mechanism built into Coinbase. For example, Algorand offers an APY of 4.37% in their native wallet just for holding, while Coinbase offers much lower, around 3%. They are taking that difference as straight profit. This goes for ETH 2 staking as well. To quote the Coinbase website: We take a commission on all [staking] rewards received, and the return rate for our customers reflects this commission and the actual amount of your crypto that was staked.
So in a way, Coinbase is incentivized to hold more of these coins with staking mechanisms as they are scalping off the top of these certain coins, like Algorand, you are buying and holding on their platform, which results in an extremely easy flow of revenue for the company. Coinbase has run into some issues, for example, with their now-defunct lending platform, which was shut down by the SEC, but they continue to raise large sums of capital.
Coinbase has raised “$2 billion from the sale of its junk bonds midway through September.” They are well on their way to becoming the digital crypto bank of the world. And according to JMP, who gave COIN their first buy rating, interest in the stock is peaking, because it is considered a less volatile proxy for getting crypto exposure. JMP’s analyst went on to say Coinbase is “is becoming the infrastructure of the crypto economy so if the crypto-economy grows, that should be very good for Coinbase.”
They are expanding into new horizons, too, beyond trading as JMP mentioned. ‘Coinbase Cloud’ is seeking to become the Amazon Web Services (AWS) of crypto, as their analyst put it. With regulatory concerns basically in the rear-view and Q4 about to begin, COIN may ride the crypto market all the way up.