Coinbase Stock Is on a Tear. Why It Just Got an Upgrade. — Barrons.com
By Nate WolfWall Street has been taking cryptocurrencies seriously after years of treating the asset class as a pariah. Coinbase Global stock is a great way to play the trend, said analysts at Rothschild & Co Redburn.The firm upgraded Coinbase to Buy from Neutral in a digital asset report Friday and lifted its price target to $417 from $325. The crypto exchange has diversified its revenue away from retail trading fees to build a full-scale crypto outfit capable of serving both institutions and individuals, Redburn argued.Coinbase shares were rising 0.6% to $374.10 on Friday. The stock ended Thursday on a five-day winning streak, climbing 21% over that period, according to Dow Jones Market Data. It has gained more than 50% this year.Coinbase's share price has closely correlated with the price of Bitcoin since the company's 2021 initial public offering. The relationship made sense at one point. From 2019 to 2021, the cut Coinbase claimed from retail crypto transactions accounted for about 90% of its revenue."This correlation belies the growing diversification of the business," wrote Redburn's Nicholas Watts.Transaction fees are now around 50% of revenue, Redburn pointed out, and while the per-trade take rate may decline, growth in volume should soften the blow. More institutions are adopting digital assets, providing one boost to transaction revenue. Coinbase's move into derivatives with its $2.9 billion acquisition of Deribit, a crypto options exchange, should also help.But the company's subscriptions and services segment means it isn't so reliant on transaction volume anymore. To start, it has an agreement with Circle Internet Group to distribute USDC, the second-largest dollar-backed stablecoin, in exchange for USDC reserve income. This revenue source has grown incrementally since 2022, Redburn estimated, and likely will expand further in 2026.Coinbase also is now claiming revenue from serving as a crypto custodian, offering blockchain transactions through its in-house platform, and other services. The company provides infrastructure to over 200 financial services firms already, Redburn noted."From a stock perspective, we upgrade Coinbase to Buy (from Neutral), assessing it as a well-balanced play on broader digital asset adoption," wrote Watts.Wall Street overall remains split on Coinbase. Of the 38 analysts polled by FactSet, 17 rate the stock a Buy or equivalent and 17 rate it a Hold. Four analysts say to sell the stock.Write to Nate Wolf at [email protected] content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.