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BofA Maintains Neutral on Coinbase (COIN) Following Investor Meetings With CFO, Visibility in Retail Crypto Trading Remains Limited

September 21, 2021 7:25 AM EDT
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BofA analyst Jason Kupferberg reiterated a Neutral rating and a $273.00 per share price target on Coinbase (NASDAQ: COIN) after investor meetings with the CFO Alesia Hass.

Four key discussion points were 1) broader adoption of services beyond crypto trading, 2) increased regulation, 3) competitive landscape (focus on retail), and 4) long-term prospects for the overall crypto-economy.

In relation to these points, Kupferberg says that COIN has witnessed improving performance when it comes to other products that retail crypto trading, namely staking and earning.

“COIN remains very bullish on staking, which involves proof-of-stake to validate transactions and confirm blocks on the blockchain. Users who participate receive rewards in the form of the digital asset (less COIN’s commission). Additionally, 2M users already participate in the Earn campaign and receive one-time rewards for completing learning tasks on various crypto products. While these metrics are encouraging, revenue contribution from non-trading products will take time to mature, in our view. Meanwhile, COIN believes these offerings will drive increased user engagement and customer stickiness,” the analyst said in a client note.

When discussing regulation and the recent Wells notice regarding COIN’s Lend product, the company’s management has continued to act surprised and confused. Coinbase yesterday decided to cancel its Lend product as it continues to have proactive discussions with the SEC.

“In retail trading, COIN continues to primarily compete against a variety of global crypto platforms and fintechs (i.e. SQ/PYPL). Overall, management is supportive of competition as it increases the number of users who engage in the crypto ecosystem, many of whom COIN believes will gravitate to COIN due to its highly secure and easy to use platform. Additionally, COIN believes its current pricing model on retail trading is sustainable for the near-term, but acknowledged that pricing pressure will likely emerge over the medium-to-long term (ie, like equity trading),” Kupferberg added.

Other discussion points included the merger between Coinbase and Coinbase Pro into one unified retail crypto platform, strong US performance and global expansion plans, DeFi, and Coinbase Prime.

All in all, Kupferberg is waiting for more “concrete signs of progress against COIN’s long-term vision and near-term revenues will likely remain highly concentrated in retail crypto trading, which has limited visibility,” before revisiting the Neutral rating.



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