Coinbase Global shares rose 10% following JPMorgan’s upgrade to neutral after Bitcoin held onto ETF-induced gains. Analyst Kenneth Worthington cites the launch of Bitcoin ETFs and the bullish prices of Bitcoin and Ethereum as beneficial for Coinbase. Despite the downgrade, Worthington is optimistic about the value; The third quarter of 2024 increased revenue by 14.2%, to $674.2 million.
Coinbase Global (COIN) shares rose 10% after JPMorgan raised it to neutral. The bank’s expert sees potential for COIN, given its strong ties to the sustained momentum of the Bitcoin price.
JPMorgan analyst Kenneth Worthington upgraded COIN to neutral from underweight, as Bitcoin touches $52,400.
Worthington Turns Bullish amid Bitcoin Momentum
Worthington said the launch of Bitcoin exchange-traded funds (ETFs) has led to significant price appreciation of the underlying Bitcoin asset rather than just being a selling event. The bullish price momentum enhances the earning power of crypto companies like Coinbase.
“Given the acceleration in recent days of flows into Bitcoin ETFs and the significant price appreciation of Bitcoin and now Ethereum, we are returning to a Neutral rating on Coinbase as we see the higher cryptocurrency prices not only sustaining, but improving, activity levels and Coinbase’s earnings power as we look to 1Q24,” the analyst wrote in a note to clients Thursday.”
Earlier this month, cryptocurrency brokers Robinhood claimed that clients preferred Bitcoin spot trading over ETFs, suggesting post-ETF income potential for spot trading. Worthington said:
Starting 2024, Worthington downgraded the stock to underweight. At the time, he set an $80 price target for the asset, arguing that the exchange was facing headwinds as investors piled into the new ETFs.
Now, Worthington and others are bullish on Coinbase stock ahead of its Q4 2023 earnings call. In Q3 2024, the cryptocurrency exchange beat top-line estimates with a 14.2% year-over-year revenue increase to $674.2 million.
The company’s custody business also appears poised to thrive, having been chosen as a custodian for Bitcoin ETFs from Franklin Templeton, Global X, Valkyrie, Invesco Galaxy, WisdomTree, Bitwise, BlackRock, and Grayscale.
COIN’s correlation with the price of Bitcoin is also a cause for optimism for investors. The stock price rose 62% in November 2023 before the US Securities and Exchange Commission approved Bitcoin ETFs.
“Coinbase’s business is geared towards higher token prices,” Worthington wrote. “The core revenue is transaction-based and given fees are driven off value traded, the higher value and higher velocity that accompanies the higher token prices should drive trading volume higher.”
COIN Price About to Break Higher
Yesterday, COIN price reached the 0.618 Fib retracement resistance level of the previous decline at $160. This is also a zone of horizontal resistance. This level usually acts as a ceiling if the movement is corrective.
However, COIN’s premarket price is currently at $168, considerably above the 0.618 Fib retracement resistance level. The closest resistance is at $187, created by the 2023 highs. If COIN were to break above it, there would be a lack of resistance until $232, 45% above the current price. The RSI supports the breakout as it has moved above 50 (green icon). Conversely, failure to rise above $160 can trigger a 25% drop to the nearest support at $120.
The exchange might not be profitable this year. According to an analysis by InvestingPro, Coinbase has a negative operating income margin of -55.53%. This profitability ratio measures the profitability of a company after paying its variable costs. Coinbase’s businesses also face legal problems with regulators.
By Leonardo Perez
