Coinbase Global got a huge price target boost on Friday, but the analyst -- a longtime bear on the cryptocurrency broker -- says the stock remains a Sell. It's still a good sign ahead of the company's next earnings release.
"HODLers win the quarter," Mizuho analyst Dan Dolev wrote in a Friday note on Coinbase, referring to the crypto slang for holding on (to assets) for dear life. Dolev raised his price target on Coinbase stock to $145 from $84 but maintained his Sell rating on the shares. Coinbase stock closed at $263.01 on Thursday, up more than 50% so far this year.
The cause for Dolev's -- somewhat begrudging -- optimism is the trading frenzy that has ensued since U.S. approval in January of spot Bitcoin exchange-traded funds (ETFs), which have seen billions of dollars of inflows and a renewed interest in crypto.
Since a core part of Coinbase's business remains charging fees for crypto trades, a new flurry of activity should have a direct positive impact on revenue. Dolev noted that Coinbase's average daily trading volumes rose to $3.3 billion in the first quarter of 2024 from below $2 billion last October.
"Strong spot volumes post-Bitcoin ETF launch -- especially in alt-coins -- could drive nearly 40% upside to [first quarter] consensus revenue, as high-margin retail investors are drawn into a rising crypto price environment," Dolev wrote.
The current consensus among analysts surveyed by FactSet is that Coinbase will post first-quarter revenue of $22.9 billion, so by Mizuho's forecast that number could be well above $30 billion.
"Although we are raising estimates amid a favorable near-term setup, our long-term fundamental concerns remain," Dolev added.
Mizuho has long been negative on Coinbase, and Dolev reiterated some of his lingering concerns. These include pressure on fees from competition, a reliance on "lower-quality and cyclical revenue" from trading in smaller tokens and services like staking -- the subject of a battle with the Securities and Exchange Commission.
There's also the question of valuation. "Despite favorable near-term setup, we can't turn a blind eye to rich valuation," Dolev wrote. "Coinbase is currently trading at a lofty 26x 2025 consensus [earnings before interest, taxes, depreciation, and amortization' multiple. This is well above the 11-16x median for peers in payments, exchanges, and asset managers."
Dolev's skepticism around Coinbase's valuation is worthwhile -- in part because it's apparent that the stock does not really trade in line with fundamentals. As Coinbase's chief financial officer, Alesia Haas, told Barron's earlier this year, "when our stock rallies, it is a reflection of the broader sentiment around the future of crypto more than a reflection of Coinbase financials or our near-term financial performance."