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On Monday, JPMorgan updated its stock price target for Coinbase (NASDAQ:COIN) Global Inc. (NASDAQ: COIN), increasing it to $181 from the previous target of $171, while maintaining a Neutral rating on the stock. The adjustment reflects the firm's revised expectations ahead of Coinbase's second-quarter 2024 earnings, considering the mixed performance of the crypto market during the quarter.
The second quarter saw a decline of 14% in the total crypto market cap, slightly better than JPMorgan's initial predictions. This led the firm to raise its assets under custody (AUC) estimates by approximately 2% to $302 billion. Despite a contraction in the markets in April and June, May experienced a boost following the approval of U.S. Ether spot ETFs, contributing to the quarter's complex performance.
Coinbase's transaction revenue is projected to be around $720 million for the quarter, with fee rates for spot retail at 160 basis points and institutional rates at 3 basis points. Trading volumes on Coinbase reached $218 billion in the second quarter, marking a 29% decrease sequentially but a substantial 136% increase year-over-year.
An increasing portion of these volumes is attributed to institutional investors, drawn by spot Bitcoin ETFs, which accumulated about $2.4 billion in new capital despite lower trading volumes compared to the previous quarter.
The firm also noted that the velocity of spot trading significantly slowed, falling below the quarterly average of the past five years. However, Coinbase's derivatives products showed relative resilience, with volumes and transaction fees decreasing by approximately 15-20% sequentially during the same period.
In addition to trading activities, Coinbase's Base platform saw increased profitability following Ethereum's Dencun Upgrade in mid-March 2024. This upgrade significantly reduced costs on Ethereum's Layer-2 chains, leading to nearly 100% margins on all Base-related revenue. For the second quarter, JPMorgan anticipates that Coinbase will earn around $20 million in net Base fees.
JPMorgan's model for Coinbase includes expenses aligned with the second-quarter outlook, resulting in an estimated adjusted EBITDA margin of about 42%. With these considerations, JPMorgan maintains its Neutral stance on Coinbase, setting a December 2024 price target of $181, which reflects the firm's higher assumption for the total crypto market cap.
In other recent news, Coinbase Global Inc. has been in the spotlight with a series of significant developments. Following positive remarks on Bitcoin by Donald Trump, the major cryptocurrency exchange experienced a 3.7% rise in its stock value.
Analysts at Bernstein noted the contrast between the current administration's stringent stance on cryptocurrencies and Trump's supportive rhetoric. The company also expanded its board with three new directors, including an OpenAI executive, to enhance its influence over U.S. crypto policy.
However, Coinbase also faced regulatory challenges as its subsidiary, CB Payments Limited, was fined £3.5 million by the UK's Financial Conduct Authority for lacking adequate anti-money laundering controls. Despite this, Citi analysts upgraded Coinbase stock from Neutral to Buy, setting a new price target at $345, influenced by recent shifts in the U.S. political landscape and a significant Supreme Court decision.
These are recent developments, reflecting the dynamic nature of the cryptocurrency sector and its interplay with political and regulatory factors. Investors are closely monitoring these events, along with other company news, as they could significantly impact the company's future performance.
InvestingPro Insights
As Coinbase Global Inc. (NASDAQ: COIN) navigates through the complexities of the crypto market, recent data from InvestingPro provides a nuanced perspective on the company's financial health and market position. The market capitalization stands at a robust $58.36 billion, signaling a strong market presence.
Despite a challenging quarter, Coinbase is trading at a P/E ratio of 42.46, with an adjusted P/E ratio for the last twelve months as of Q1 2024 at 48.5, reflecting investor confidence in its earnings potential. Moreover, the company has demonstrated impressive revenue growth of 38.87% over the last twelve months as of Q1 2024, outpacing many industry counterparts.
InvestingPro Tips highlight that while analysts have revised their earnings expectations downwards for the upcoming period, they also predict sales growth in the current year and expect net income to grow. This mixed outlook is reflected in the company’s high earnings multiple and its significant price volatility. However, it is important to note that Coinbase has been profitable over the last twelve months and analysts remain optimistic about its profitability this year.
For readers looking to delve deeper into Coinbase's financial metrics and gain additional insights, there are 13 more InvestingPro Tips available at InvestingPro. To enhance your investment research, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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