Coinbase’s earnings report gives Bernstein analyst confidence in her $250 price target

By: Ajay Pal Singh
Ajay Pal Singh
Ajay worked at Tata Motors in project planning before discovering his passion for stocks. Today, he lives in Canada and enjoys… read more.
on May 14, 2021
  • Bernstein analyst reiterates her $250 target for Coinbase.
  • Evidence that the company can diversify revenue away from crypto trading.
  • We are still in the early innings of crypto growth.

Harshita Rawat, senior research analyst at AB Bernstein, in an interview with CNBC reiterated her price target of $250 for Coinbase (NASDAQ: COIN), after the company released its latest earnings report for the Q1 2021.

The company reported revenues of $1.8 billion, up from $585 million in the fourth quarter of 2020 and net profit of $771 million, up from $177 million in the previous quarter.

Can the company continue to grow?

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Harshite said that in light of the increasing competition from Paypal, Square, banks and brokerages with much larger user bases, the debate is whether the company can continue to grow. 

Her key takeaway from the earnings report was that there is evidence to highlight the company can diversify revenue away from crypto trading. But right now, retail trading still generates the majority of their revenues.

Crypto is here to stay and we are still in the early innings. On a long-term basis crypto should continue to increase market cap and trading volume should continue to remain elevated due to the 24/7 trading in most of these assets.

How to value Coinbase?

Coinbase earns 90% of its revenues from retail crypto trading. That implies that the largest cryptocurrency exchange operator in the U.S. should be valued like an exchange or a brokerage.

If the revenue multiple of those companies is applied on the revenues of Coinbase, we get a price target of $250 for the company.

Coinbase started trading at $381 after its IPO but has been trading well below that level since then. It opened at $280.37 today.

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