On Wednesday, Compass Point raised the price target for Coinbase Global Inc (NASDAQ:COIN) to $325 from the previous target of $235, while maintaining a Buy rating on the stock. The adjustment follows a notable increase in trading volumes reported by the cryptocurrency exchange platform.
Coinbase experienced a significant rise in average daily volume (ADV) in March, reaching approximately $5.4 billion, and reported first-quarter 2024 ADVs of around $3.4 billion. This represents a quarterly increase of 107% and an annual surge of 110%. As a result, Compass Point has revised its first-quarter 2024 revenue and adjusted EBITDA estimates for Coinbase from approximately $1.15 billion and $523 million to about $1.4 billion and $750 million, respectively. These figures substantially exceed the consensus.
"We think COIN remains in a good position from a trading/volume perspective given where we are in the current cycle (estimated ~35-40%) and continue to see potential for share gains," said the analysts.
The exchange is also seen as benefitting from the current high-interest-rate environment in 2024, with a strong year-over-year recovery in trading activity driven by retail investors and an increase in interest income and Stablecoin revenue. This follows the bottoming out of USDC, a stablecoin, in the fourth quarter of 2023, which now has a market cap of approximately $32 billion.
Looking ahead to 2025, Compass Point anticipates Coinbase will sustain strong trading and transaction revenue as interest rates are expected to fall. Additionally, the firm highlights the recent adoption and profitability improvements in Coinbase's Ethereum Layer 2, which followed Ethereum's Dencun upgrade in March. This development could potentially enable Coinbase to expand into payments and recurring fee revenue—a prospect that is currently underappreciated by investors, according to Compass Point.
The new price target of $325 is based on an 18.5-19 times multiple of Coinbase's projected 2025 enterprise value to EBITDA (EV/EBITDA).
InvestingPro Insights
In light of the recent price target upgrade for Coinbase Global Inc (NASDAQ:COIN) by Compass Point, it's worth considering additional metrics and insights from InvestingPro to better understand the company's financial health and market position. A notable InvestingPro Tip highlights that net income for Coinbase is expected to grow this year, aligning with the positive outlook presented by Compass Point. Additionally, three analysts have revised their earnings upwards for the upcoming period, suggesting a consensus view that Coinbase's financial prospects are improving.
From a data perspective, Coinbase's current market capitalization stands at $53.02 billion, reflecting its significant presence in the cryptocurrency exchange market. The company's Price/Earnings (P/E) ratio, as of the last twelve months ending Q4 2023, is notably high at 1326.74, indicating a premium valuation by the market, potentially due to expectations of future growth. Moreover, the stock has experienced a robust 3-month price total return of 91.98%, demonstrating strong recent performance and investor confidence.
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