- Coinbase stock jumped 6% due to rising crypto prices and JPMorgan upgrading its rating from underweight to neutral, citing positive impact of Bitcoin ETFs on crypto markets.
- Bitcoin ETFs exceeded expectations by amassing over $10 billion assets under management in first month, boosting Coinbase’s revenue from fees through its custody partnerships.
- However, some analysts remain concerned about Coinbase’s profitability this year, forecasting losses around $16 million in Q4 2023, though others anticipate a net income of $103 million. The company also faces legal challenges like an SEC lawsuit over allegedly offering unregistered securities.
Coinbase stock jumped 6% in early trading on February 15th, boosted by rising crypto prices and JPMorgan’s rating upgrade. JPMorgan analyst Kenneth Worthington changed his rating on Coinbase from underweight to neutral, citing the positive impact of Bitcoin exchange-traded funds (ETFs) on crypto markets.
JPMorgan Upgrades Coinbase Rating
After downgrading Coinbase in January, JPMorgan analyst Kenneth Worthington revised the stock rating from underweight to neutral. In a note to clients on February 15th, Worthington wrote, “Given the acceleration in recent days of flows into Bitcoin ETFs and the significant price appreciation of Bitcoin and now Ethereum, we are returning to a Neutral rating on Coinbase as we see the higher cryptocurrency prices not only sustaining but improving activity levels and Coinbase’s earnings power as we look to 1Q24.”
Bitcoin ETFs Boost Coinbase Revenue
Bitcoin ETFs amassed over $10 billion in assets under management in their first month of trading, exceeding most analysts’ predictions. There has been solid demand for the crypto investment vehicle. Coinbase’s custody arm has partnered with most asset managers that launched Bitcoin ETFs in January. These products are anticipated to yield between $25 million and $30 million in fees for the company.
Concerns Over Coinbase Profitability
On the negative side, the exchange may not be profitable this year. According to an analysis from InvestingPro, Coinbase has a negative operating income margin of -55.53%. This profitability ratio measures a company’s profitability after paying its variable costs. Analysts surveyed by Bloomberg forecast the exchange to record losses of around $16 million in the last quarter of 2023.
However, some analysts are more optimistic. Needham & Company’s John Todaro anticipates Coinbase to post a net income of $103 million, which could push the exchange to profitability for the first time in two years.
Legal Challenges for Coinbase
Coinbase‘s businesses are also challenged by legal troubles with regulators. The United States Securities and Exchange Commission sued the exchange in June 2023 for allegedly offering unregistered securities.
Investor Optimism Despite Challenges
Nevertheless, investors seem to be looking at the exchange’s long-term prospects. The stock’s one-year price total return is up 131%. InvestingPro notes that COIN is currently trading at a high Price/Book multiple, meaning the stock could be overvalued compared to the company’s actual net assets. JPMorgan’s Worthington maintained the stock target price at $80, well above the $170 trading price at the time of writing.
