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Coinbase is a leader like Tesla, Zoom and Snowflake. Shares are worth $500, say BTIG analysts.

MarketWatch logo MarketWatch 4/17/2021 Barbara Kollmeyer
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CRYPTOS

Shares of cryptocurrency exchange Coinbase Global were wobbling early Thursday, but at least one bullish call from Wall Street was cheering them on.

Analysts at BTIG initiated coverage on the digital currency platform with a buy rating and a $500 price target. Stock in Coinbase headed higher in opening trades but has since slipped 1.6%.

“We believe COIN should be regarded as a market leader in a category characterized by rapid and apparently sustainable growth driven by significant changes in consumers’ behaviors and their adoption of new technology,” said BTIG analysts Mark Palmer and Andrew Harte, in a note to clients.

“As such, we think the multiple at which COIN is valued should reflect that distinction as it does for other category leaders with open-ended growth opportunities such as [videotelephony company] Zoom [electric-car maker] Tesla and [cloud computing data company] Snowflake ” they said.

BTIG rates those companies buy, unrated and neutral, respectively.

Coinbase is the “gold standard among digital asset exchanges,” they said. Its “sustained rapid growth” is coming as the industry’s ecosystem expands and institutional adoption increases, they said. Financial services company Visa last month announced plans to settle transactions in a “stablecoin” backed by the dollar, while Tesla and the digital-payments companies PayPal and Square all offer transaction options in bitcoin or other cryptocurrencies.

The institutional embrace and general enthusiasm by individual investors are among the factors that have helped fuel enthusiasm for the crypto space this year, with bitcoin recently surging to new records above $60,000, with a gain of 117% so far in 2021.

Coinbase began trading on Wednesday at $381, up from a $250 reference price, and climbed all the way to $429.54 before ending at $328.28. While those with high hopes for Coinbase’s prospects would have liked to see the stock hang on to those elevated levels, the day still delivered a 32% gain. At its closing price, Coinbase was valued at $85.8 billion — and had lived up to the hype.

Read: Not everyone gets crypto. Coinbase’s Emilie Choi plans to change that.

The BTIG analysts based the $500 price target on a multiple of 16 times the company’s forecast full-year 2024 net revenue of $8.2 billion.

“We believe COIN, the most popular consumer-facing cryptocurrency exchange in the U.S., is positioned to be a primary beneficiary of the increased adoption of bitcoin and other digital assets as it continues to scale in the U.S. and internationally,” said the analysts.

They believe the company has several ways to build on its first-mover advantage as an “on-ramp for mainstream crypto investors,” such as diversifying its revenue stream away from transaction fees, a dependence that creates potential for volatility as crypto markets fluctuate. Also, the company can leverage its robust platform for institutional investors, a “key driver of growth going forward,” the BTIG analysts said.

At the core of BTIG’s bullish view on Coinbase is the company’s market share, which, the analysts noted, represented 11.3% of the world’s crypto assets as of March 31, up from 4.8% in 2018. At the end of the first quarter of 2021, the exchange held $223 billion of crypto assets on its platform. The BTIG team also views Coinbase as a safe harbor among platforms, helped by its rigorous adherence to regulatory compliance.

If cryptocurrency’s “total market capitalization continues to grow, rising from about $2.1 trillion to a significant multiple of that figure, then the company’s upside could be immense,” said the BTIG analysts.

Read on: Coinbase listing has fueled ‘a lot of frenzy’ and ‘that never ends well,’ bitcoin bull Novogratz tells MarketWatch

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