In brief
- Benchmark analyst Mark Palmer raised his price target for Coinbase to $421 from $301.
- The company is benefiting from regulatory and legislative tailwinds, in the U.S. through the GENIUS Act, and overseas through MiCA.
- The company is introducing products and services that further integrate USDC into its platform, allowing it to capture more stablecoin income.
Positive legislative and regulatory developments buoyed Coinbase’s stock last week, among other events boding well for the crypto exchange’s long-term growth prospects, investment bank Benchmark, wrote in a Monday note.
The company’s share price jumped more than 23% as Coinbase secured a Markets in Crypto Assets, or MiCA, license and a bipartisan slate of U.S. lawmakers passed the GENIUS Act in the Senate, which seeks to establish federal rules for stablecoins, Equity Research Analyst Mark Palmer wrote. Coinbase’s shares changed hands on Monday around $300, according to Yahoo Finance.
While reiterating a “Buy” rating, Palmer raised his price target for Coinbase to $421 from $301, explaining that a higher earnings multiple for its stock is warranted, given that Coinbase’s initiatives are “aimed at taking full advantage” of an improving operating environment.
With a MiCA license, Coinbase will be able to offer crypto trading, custody, staking, and payments across 27 European Union, Palmer wrote. In a statement on Monday, Coinbase said that it had chosen Luxembourg for establishing its European crypto hub.
The GENIUS Act represents a major opportunity for Coinbase because a “major segment of the company’s business” is tied to Circle’s USDC stablecoin, Palmer wrote. Coinbase invested in the stablecoin issuer prior to its public offering, which has been hugely successful, and the exchange earns income from assets like backing the stablecoin U.S. Treasuries.
In the first quarter of this year, Coinbase earned $300 million in stablecoin revenue, accounting for roughly 15% of the exchange’s total sales, according to a shareholder letter.
Palmer wrote that Coinbase “would benefit from the increased adoption and use of stablecoins that the GENIUS Act is expected to facilitate,” noting that the bill could be passed by the U.S. House of Representatives and signed into law by August, pending substantial changes.
Coinbase earns 100% of the interest on USDC held directly on its platform, and Palmer noted that the firm unveiled a payments service leveraging the stablecoin. Coinbase also signaled that USDC will become available as a form of collateral on its U.S.-regulated derivatives platform, representing another way that Coinbase is leveraging USDC .
Although Coinbase has tried to diversify its revenue using stablecoins, the company’s main money-maker has been transaction fees for years. In the first quarter, transaction revenue fell 19% quarter-over-quarter to $1.26 billion, amid widespread macroeconomic uncertainties.
In the coming months, Coinbase may come up with other ways to promote USDC’s usage on its platform. Last week, Coinbase’s Chief Legal Officer Paul Grewal said tokenized stock trading was a “huge priority,” mirroring recent moves from competitors like Kraken, Palmer noted.
Edited by James Rubin
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