Coinbase’s stock price experienced a 6% surge in the early trading hours of February 15, benefiting from both an endorsement by a JPMorgan analyst and a general increase in cryptocurrency token values. Analyst Kenneth Worthington, who previously downgraded the stock in January, has now shifted his assessment to a more favorable stance. This reconsideration is attributed to the successful performance of Bitcoin ETFs, which are believed to contribute positively to the cryptocurrency marketplace.
Analyst Reassesses Coinbase’s Market Position
Worthington’s upgrade to a neutral rating from the previous underweight reflects a change in perspective, acknowledging the growth of Bitcoin ETFs and the appreciation in Bitcoin and Ethereum prices. He suggests that the heightened cryptocurrency prices are likely to enhance Coinbase’s operations and profitability going into the first quarter of 2024.
Bitcoin ETFs have attracted significant attention, amassing over $10 billion in assets within their initial month, surpassing many predictions. Coinbase’s partnership with various asset managers launching these ETFs is set to bring in service fees that could gross between $25 million and $30 million.
Coinbase’s Financial Outlook and Regulatory Challenges
Despite these positive signs, some analyses indicate that Coinbase might not report profits in the current year, with a negative operating income margin of 55.53% as per InvestingPro. Bloomberg’s analyst consensus forecasts a $16 million loss for the final quarter of 2023, although others, like John Todaro from Needham & Company, are more optimistic, projecting a potential $103 million net income. This would mark a turnaround for Coinbase, potentially achieving profitability for the first time in two years.
Coinbase is also navigating legal waters, facing a lawsuit from the U.S. Securities and Exchange Commission over claims of offering unregistered securities. Yet, investors appear to remain positive about the company’s long-term potential, as indicated by a 131% increase in the stock’s one-year total price return. Despite this enthusiasm, a high Price/Book ratio suggests the stock might be priced above the company’s net asset value.