Investment banking firm KBW has revised its outlook on Coinbase, emphasizing the opportunity for investors to benefit from the long-term growth potential of the crypto economy. As a result, KBW has increased its price target for Coinbase (COIN) from $160 to $230 while maintaining its market performance rating.
The recent uptick in Coinbase’s stock price reflects growing investor confidence, with the stock closing at $245.84 on Tuesday and experiencing a year-to-date increase of over 40%.
Analysts at KBW, led by Kyle Voigt, are optimistic about Coinbase’s revenue prospects in the near term. They highlight the potential revenue opportunity stemming from the rising outstanding balances of USD Coin (USDC), a stablecoin issued by Circle and backed by Coinbase. USDC outstanding balances surged by 32% in the first quarter, contributing to Coinbase’s gross interest income on approximately 56% of these balances.
Additionally, increased trading volumes in March, with the average daily volume reaching $5.1 billion, compared to $2.4 billion in February, are seen as positive indicators of Coinbase’s market position and revenue growth potential.
However, KBW acknowledges the challenges Coinbase faces, including its legal battle with the U.S. Securities and Exchange Commission (SEC) and the uncertain regulatory environment. These factors may deter some institutional investors from considering Coinbase stock.
Last week, Judge Katherine Polk Failla ruled that the SEC’s lawsuit against Coinbase can proceed, indicating plausible grounds for the allegations that Coinbase operates as an unregistered securities exchange, broker, and clearing agency. While the judge granted a partial victory to Coinbase by dismissing the SEC’s claims against its Wallet, the lawsuit highlights ongoing regulatory challenges for the exchange.
Despite these challenges, KBW’s increased price target for Coinbase reflects its confidence in the company’s ability to navigate the evolving crypto landscape and capitalize on long-term growth opportunities.
