Cryptocurrency exchange Coinbase Global Inc (NYSE:COIN) got off to a strong start on Wall Street following a direct listing of its shares last week.
The Coinbase Analyst: Rosenblatt Securities analyst Sean Horgan initiated coverage of Coinbase with a Buy rating and $450 price target.
The Coinbase Thesis: Rosenblatt is bullish on the long-term upside for Coinbase, as it stands to benefit from the growing adoption and acceptance of cryptocurrency, Horgan said. The firm’s short-term view is cautious as the stock faces downside risk from a drawdown in the price of crypto, he added.
Sustainable long-term growth is less uncertain, given the upside risk from institutional adoption and subscription revenue growth, the analyst said.
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Horgan listed the following as reasons for owning Coinbase stock:
• Coinbase’s current 11% share of the cryptocurrency market leaves the exchange in a pole position to capitalize on long-term growth, the analyst said. Key to long-term success is maintaining market share, investing in infrastructure to hasten institutional adoption and expanding its suite of subscription and services to acquire new customers and increase average revenue per user, he added.
• The exchange’s differentiator is its security infrastructure and it is the deepest economic moat the company possesses, according to Horgan.
• There is scope for gradual fee compression from the current 55-60 basis points to 35-40 basis points by 2025, the analyst said.
• The analyst sees Coinbase in a unique position of monetizing its retail userbase through ancillary financial services such as credit/debit card, stock trading, and consumer loans, similar to what Square Inc.’s (NYSE:SQ) Cash App and PayPal Holdings Inc.’s (NASDAQ:PYPL) Venmo have done.
Cryptocurrency, according to Rosenblatt, has reached an inflection point on its road to legitimacy, and this is a long-term disruptive trend only in its early innings.
“Net/net, we are buyers of COIN as a long-term category leader and pureplay cryptocurrency stock,” the firm said.
COIN Price Action: At last check, Coinbase shares were down 2.77% to $311.92 Wednesday evening.
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