Why Goldman Sachs expects Coinbase’s stock to rise another 11%

  • Goldman Sachs on Thursday upgraded Coinbase stock to neutral from sell, citing the company's profitability.
  • In February, the US-based exchange reported its first profitable quarter in two years.
  • Goldman still doubts the use case for cryptocurrencies.

Goldman Sachs said it "underrated" cryptocurrency exchange Coinbase, as the investment bank upgraded its rating on the company's shares from sell to neutral on Thursday, although it still expressed doubts about a use case for cryptocurrencies.

The bank raised its price target for Coinbase shares to $282 from its previous target of $170. Shares were trading at $254.10, up 4.7%, as of Friday afternoon ET and about 11% below Goldman's new price target.

Goldman's change of tone is the latest in a series of positive forecasts for US-based Coinbase as Bitcoin returns to all-time highs. On Friday, the leading cryptocurrency broke its previous record by reaching $69,200, up 330% from a 2022 low of $16,000.

In February, Coinbase posted its first quarterly profit in two years, prompting rating upgrades from JPMorgan, Oppenheimer and others.

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Coinbase shares have risen 326% since Goldman added the stock to its sell list in June 2022. The stock has outperformed Bitcoin by 190% since then, according to Goldman.

Cost effectiveness outweighs lack of use case

The rally cemented Coinbase as an industry leader, but despite the company's profitability and a thriving cryptocurrency market, Goldman still expressed doubts about the widespread use of cryptocurrencies.

“We still see limited use cases for cryptocurrencies today,” the company noted, although it said the recent rise in cryptocurrency prices “significantly offset” the lack of widespread adoption.

Goldman analysts also acknowledged Coinbase's "commitment to managing more consistent profitability over time, which we had underestimated."

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According to Quinn Thompson, head of capital markets and growth at Maple Finance, Coinbase's astute management has allowed it to survive while others have failed.

Coinbase's "major US competitors are nearly obsolete," Thompson wrote in an X mail On Wednesday. “FTX is gone, Gemini is a shell of its former self. Kraken is far behind.”

Thompson also pointed to Coinbase's growing domestic market and international expansion as positives.

Meanwhile, Goldman analysts attribute Coinbase's survival to a "historical focus on regulatory compliance."

Despite the exchange's efforts to be a leader in compliance, it has regularly heads butt with the Securities and Exchange Commission. Time will tell if Coinbase beats the agency and if Bitcoin's rally will keep it profitable.

Tyler Pearson is a junior markets correspondent at DL News. He is based in Alberta, Canada. Do you have advice? Contact him at ty@dlnews.com.

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