The buzz around Coinbase’s stock could hardly be missed as it leapt by 6% in the morning hours of February 15th, a surge attributed not just to an uptick in token prices but significantly bolstered by a nod of approval from JPMorgan analysts. This isn’t just any day on the trading floor; it’s a testament to the volatile, exhilarating ride that is the cryptocurrency market, where endorsements from big players like JPMorgan can set the stage for noteworthy shifts.
After a previous downgrade, JPMorgan analyst Kenneth Worthington circled back this February, upgrading Coinbase from underweight to neutral. This pivot was fueled by the burgeoning influence of Bitcoin ETFs on the crypto sphere—a move that signifies more than just market dynamics; it’s a nod to the robust potential of digital currencies and their platforms.
Bitcoin ETFs, having pooled over $10 billion in assets within their debut month, defied expectations and showcased the market’s voracious appetite for cryptocurrency investment avenues. Coinbase, in this whirlwind, has strategically positioned itself as a custodian for the majority of these Bitcoin ETF launches, a partnership expected to rake in fees ranging from $25 million to $30 million.
Coinbase in Uncertain Waters
Despite the positive momentum, clouds of uncertainty loom over Coinbase’s profitability horizon. With an operating income margin in the negatives, the platform’s financial health appears to be on shaky ground, as underscored by InvestingPro’s analysis. The crypto exchange, amidst forecasts of continued losses, finds itself at a crossroads, with some analysts holding a more optimistic view. John Todaro of Needham & Company breaks from the pack, projecting a potential net income of $103 million, which could signify a return to profitability—a beacon of hope after a two-year lull.
Coinbase’s journey is further complicated by legal skirmishes with regulatory bodies, a reminder of the ongoing tug-of-war between innovation and oversight. Yet, despite the SEC’s lawsuit alleging the offering of unregistered securities, the investor community remains bullish, eyeing the long-term horizon with a 131% uptick in the stock’s one-year price total return. This optimism persists even as debates around the stock’s valuation continue, with some suggesting that Coinbase’s high Price/Book multiple could point to an overvaluation.
A Glimmer of Profitability Amidst Volatility
In the fourth quarter, Coinbase made a net income of $273 million. This was the company’s first profit in two years. This important milestone, marked by a nearly 50% rise in net income from the previous year, shows that investors are becoming more interested in cryptocurrencies, especially since the U.S. Securities and Exchange Commission approved the first bitcoin ETF.
The approval of the ETFs has clearly led to a rise in demand for cryptocurrencies, which suggests that digital currencies will become more widely accepted and included in regular people’s investment accounts. Coinbase, riding this wave, said that transaction revenues were the main growth drivers in the last quarter, even though subscription and services revenues stayed about the same.
The exchange also pointed out that crypto prices are more volatile than usual, which reminds them of the chaos seen at the beginning of the year, when regulation goals and fiscal positivity caused prices to rise and fall. In a candid interview with CNBC, Alesia Haas, Coinbase’s CFO, talked more about the company’s fee structure and emphasized how it caters to both “Simple” and “Advanced” traders. Haas says that this approach helped Coinbase get through the rough seas without having to change fees, even though trade volumes went up.
