By Sam Boughedda
Barclays raised its price target for Coinbase (NASDAQ:COIN) shares to $77 from $73 per share, maintaining an Equal Weight rating in a note Monday.
Analysts there told investors in a note that exchange volumes, app download data, and crypto asset prices continued to soften in the quarter, but rising rates are set to be a material tailwind.
"For Q3, we are forecasting revenues below the Street as exchange volumes declined in September. But the new story we see developing for Coinbase is interest income: while rates were low (and crypto markets were hot), investors paid little attention to this revenue driver," said the analysts.
They added that Coinbase generates interest on cash balances that "amount to tens of billions," including both customer and corporate cash, as well as the reserves backing the company’s proportionate share of USDC.
"While we are forecasting a weaker Q3, we see a material uplift from rates that leads us to raise F23 and F24 revenues by a low-teens % and adj. EBITDA estimates by ~2.5x and ~30%, given this rate benefit should come on at high incremental margin. We raise our PT only modestly to $77 given: 1) we view interest income as a lower-multiple revenue stream vs. the core transaction-based business, and 2) market conditions have worsened since our last update, and market multiples have come down," the analysts concluded.