Coinbase Will Transcend Crypto Winter Backed By Recovering Trading And Staking Business Opportunities In 2H: Analyst

Compass Point analyst Chris Allen upgraded Coinbase Global Inc COIN from Neutral to Buy and raised the price target to $100 from $75.

The analyst updated 4Q22 sales and adjusted EBITDA estimates slightly versus the management.

Allen revised 4Q22 Sales/EBITDA estimates slightly higher from $556M/($185M) to $563M/($167M), bringing the full-year 2022 adjusted EBITDA estimate to ($414M), in line with COIN's guidance that it would not exceed a $500M EBITDA loss for the year.

The analyst expects 1Q23 sales/EBITDA of $633M/ ($76M), which reflects COIN's January guidance for a 25% reduction in opex compared to 4Q22 resulting from COIN laying off 950 employees.

Allen established CY24 Sales/EBITDA estimates of $4.5B/$745M, reflecting a solid return to growth and profitability as it emerges from the weak macro environment and starts a new crypto cycle.

Allen believes COIN is well positioned to gain market share, especially among U.S. retail investors, when the crypto bull market returns, which will likely start in late 2H23 and continue through 2024. Due to COIN's cost-cutting efforts, Allen expects COIN to return to EBITDA profitability during 2H23. 

While COIN currently faces regulatory uncertainty related to several aspects of its business, including staking-as-a-service, institutional custody, and a broader regulatory crackdown on the industry, he believes most of the issues are unlikely to have a materially adverse impact on operations. 

The analyst saw continued regulatory headline risk as a near certainty which he thought likely led to volatility in the shares in the near and intermediate term. 

Over the longer term, given the potential revenue opportunities around its trading and staking businesses as crypto adoption grows, its recent cost containment efforts, and its sterling reputation, COIN will make it through the crypto winter but thrive on the other side.

Price Action: COIN shares traded lower by 5.21% at $62.17 on the last check Friday.