BofA Initiates Coverage Of Coinbase: 'We Await More Signs Of Progress'

Coinbase Global Inc COIN traded higher by 2% on Friday morning after one Wall Street analyst gave his initial take on the stock.

The Analyst: Bank of America analyst Jason Kupferberg initiated coverage of Coinbase with a Neutral rating and a $274 price target.

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The Thesis: In the initiation note, Kupferberg said Coinbase is the “leading provider of crypto infrastructure.” However, the stock may have limited near-term upside trading at 18.3 times sales. For now, Kupferberg is looking for Coinbase to diversify away from cryptocurrency trading fees, which currently make up 95% of its revenue.

Services such as staking and lending are already starting to gain traction for Coinbase. Kupferberg said subscriptions and services represent significant cross-selling opportunities that could help Coinbase increase its average revenue per user.

“COIN aims to become the Amazon of crypto assets, though in our view COIN’s model is still in very early stages of development, and we await more concrete signs of progress against COIN’s long-term vision,” Kupferberg said.

Coinbase shares have been extremely volatile since the company’s IPO in April. Kupferberg said investors should expect the volatility to continue in the next year as the cryptocurrency market matures further and Coinbase navigates risks associated with potential new cryptocurrency regulations and competition in the crypto trading market.

Bank of America is projecting revenue growth of 440.1% for Coinbase in 2021 but is expecting a 4.2% decline in revenue in 2022 thanks to extremely difficult 2021 comps.

Benzinga’s Take: Coinbase is one of the few pure-play cryptocurrency stocks trading on major U.S. exchanges. For now, investors should anticipate Coinbase’s stock price to correlate very highly with the prices of Bitcoin BTC/USD and other popular cryptocurrencies given that almost all of Coinbase’s revenue at this point comes from trading fees.