Coinbase Gets Re-rated As Analyst Weighs Scalable Model Balanced By Limited Revenue Visibility

Keybanc analyst Josh Beck initiated coverage on Coinbase Global Inc COIN with a Sector Weight rating. Coinbase offers pure-play exposure to the digital asset ecosystem as an innovative and trusted service provider with a healthy capital position, a forward-thinking management team, and an ongoing commitment to user safety. 

The analyst hailed Coinbase's highly scalable model, innovative suite of products and services, and market share gains balanced by limited revenue visibility tied to crypto asset prices, volume, volatility, and industry headwinds leading to depressed crypto asset prices and market activity. 

Beck appreciated Coinbase as a trusted category builder and innovator offering consumers and institutions a gateway to the crypto-economy and expect continued share gain across customer segments and complementary markets. 

The analyst's visibility into historically highly variable revenue sources subject to crypto trading volumes, crypto asset prices, and other crypto-related activity amid a "crypto winter" led to the re-rating. 

Recent events and "crypto winter" drive caution around the industry and COIN growth as low crypto asset prices and volume create headwinds. 

Inherent volatility in crypto-asset markets challenges revenue visibility, but a growing contribution from subscription and services revenue instills some balance. 

COIN has demonstrated substantial profitability at peak scale (CY21), and recent actions demonstrate expense discipline. Scale, however, primarily comes from higher crypto asset prices and trading volume. 

Competition is broad and fragmented, though COIN stands apart for scale, compliance, and trust. Decentralized services may become more competitive with shifts in user preference. 

Regulation remains an overhang, though it promises greater clarity to the operating environment.

Coinbase traded at a discount to the primary peer group, which the analyst considered appropriate, considering the comparatively limited top-line visibility, cycle-oriented profitability philosophy, and challenges facing the crypto ecosystem exiting CY22.

Price Action: COIN shares traded higher by 4.06% at $41.88 on the last check Monday.