- Coinbase reported a first-quarter net income of $1.2 billion and a diluted EPS of $4.40.
- Analysts are optimistic about Coinbase’s smart wallet, Prime, and its growing international presence.
- Concerns about future USDC balance sustainability amidst rapid business growth.
Coinbase (COIN) experienced an exceptional first quarter, driven by favorable conditions in the cryptocurrency market and strategic diversification of its business, according to a research report by brokerage firm JMP released on Thursday.
The cryptocurrency exchange declared a net income of $1.2 billion for the first quarter, with diluted earnings per share (EPS) at $4.40. The earnings included a mark-to-market gain of approximately $650 million from cryptocurrency assets held as investments. Bitcoin (BTC), the leading cryptocurrency, saw an increase of over 34% in the first quarter, while the CoinDesk 20 Index (CD20) witnessed a rise of nearly 17%.
The broker maintained its market outperform rating and set a price target of $320. Canaccord Genuity increased its price target to $280 from $240, while keeping its buy rating. KBW also adjusted its price target upward to $240 from $230, reaffirming its market perform rating. Shares were trading down by 3.6% at $220.62 in early Friday trading.
JMP analysts, led by Devin Ryan, commented that while it’s important for investors to stay pragmatic about the periodic surges and dips in industry enthusiasm, which often track with price changes, they identify several fundamental trends that reinforce a positive outlook on Coinbase’s significant role across various facets of the crypto economy.
“While we believe investors must remain level-headed around the ebbs and flows of enthusiasm into the industry, which often coincide with fluctuations in price, we see a number of underlying trends supporting our positive thesis that Coinbase will be a relevant player in virtually all aspects of the crypto economy.”
Devin Ryan, JMP analyst
Several highlights that have sparked JMP’s enthusiasm for Coinbase include the debut of its smart wallet, Coinbase Prime, and its expanding international reach. According to a Thursday report by Canaccord Genuity, consumer and institutional transaction revenues surged by 101% and 133% respectively, from the previous quarter. This increase was attributed to enhanced overall market activity from spot exchange-traded funds (ETFs), ongoing investment in product offerings, and active user growth, as noted by analysts led by Joseph Vafi.
The broker expressed optimism about the introduction and growth of Coinbase’s layer-2 blockchain, Base, suggesting that this development could further reinforce Coinbase’s leadership by enabling low-cost transactions for its expanding base of users and assets under management.
Additionally, Coinbase reported robust growth in balances for the USDC stablecoin, both on its platform and in the overall market cap, generating $197 million in revenue, as stated in a Friday report by KBW. USDC is a stablecoin issued by Circle, which is backed by Coinbase, and the company earns gross interest income on outstanding USDC balances.
Looking forward, KBW expressed caution regarding the USDC balances, noting the recent rapid expansion of the business. They suggested that these balances might decrease once rates start to drop, although the prevailing belief that rates will remain high for an extended period could prolong the current levels of USDC balances in the near term.
