Coinbase’s Recent Momentum
Coinbase is experiencing a significant boost in momentum, catalyzed by a recent upgrade from Rothschild & Co. that reaffirms its advantageous shift in the marketplace. This positive market activity, occurring on October 3, saw shares of Coinbase Global, Inc. (COIN) rise by over 2%. The rise was triggered not only by Rothschild’s strategic recommendation to buy but also by the announcement of a pivotal collaboration with Samsung.
Strategic Developments
Rothschild set a new price target of $417 for Coinbase, predicated on the belief that the company is successfully pivoting away from its primary focus on trading. The Samsung deal is particularly transformative, integrating Coinbase’s services within the native wallets of 75 million Galaxy devices in the U.S., thereby facilitating access to millions of potential new users.
This new partnership appears to be a significant step towards normalizing cryptocurrency use among mainstream consumers by embedding crypto functionalities within everyday applications such as Samsung Pay. Such a move could redefine how users interact with digital assets, marrying cryptocurrency trading with common transactions like transportation passes.
Market Evaluation and Future Projections
Rothschild further critiques how the market still tends to evaluate Coinbase primarily based on Bitcoin’s price fluctuations, while the firm’s operational strategy is shifting away from reliance on retail transaction fees—historically around 90% of its revenue—to a more diversified revenue stream. By next year, it is anticipated that transaction fees will drop to about 50% of total income.
They attribute this transition to safeguarding revenues through increased institutional trading, the growth of derivatives, and an uptick in subscription and service revenues, especially from its stake in the USDC stablecoin and the development of its Layer-2 network, Base. Although fee compression is a typical challenge faced industry-wide, Rothschild believes that enhanced trading volumes and deeper engagement from institutional players will offset these pressures.
Comparative Outlook on Other Firms
Contrastingly, Rothschild’s outlook on other cryptocurrency firms reflects a more cautious stance. The firm recently assigned Circle – the issuer of USDC – a neutral rating due to its dependence on interest income from reserves, a significant portion of which is disbursed to partners such as Coinbase. Additionally, Robinhood faced a more challenging assessment, receiving a maintained sell rating due to concerns about its overly cyclical crypto business model that heavily relies on retail traders, making it susceptible to market volatility as the sector evolves.
