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Coinbase started with buy rating at Rosenblatt, despite downside risk from a bitcoin pullback

Published Wed, Apr 21 20218:24 AM EDT

Thomas Franck @tomwfranck

Coinbase is a long-term buying opportunity despite near-term volatility in the price of cryptocurrency as a growing number of institutions like PayPal adopt new digital coins, Rosenblatt Securities told clients. "Crypto has reached an inflection point on its road to legitimacy, and we see this as a long-term disruptive trend that is only in its early innings," analyst Sean Horgan wrote in a note published Tuesday. "We are bullish on the long-term upside of COIN as it benefits from the growing adoption and acceptance of cryptocurrency, while our short-term view is more cautious as the stock faces downside risk from a drawdown in the price of crypto," he added. "Net/net, we are buyers of COIN as a long-term category leader and pureplay cryptocurrency stock." Horgan initiated coverage on the newly public stock with a buy rating and a $450 price target, implying 40% upside from Tuesday's close. Rosenblatt believes there are a few reasons to own Coinbase, which entered public markets last week via direct listing. First, Horgan wrote about the compelling risk to reward ratio in owning a stock like Coinbase. The potential for cryptocurrency market value to quintuple to the $11 trillion market of gold "is a reasonable base-case assumption" over the next five years, the analyst wrote. Investors will want exposure to Coinbase as that happens thanks to its market share and expectations that it will be able to entice new customers with new subscriptions. Rosenblatt also sees a significant retail opportunity at Coinbase. With about 6 million monthly transacting users in the first quarter, Coinbase is in a unique position to monetize its retail userbase through ancillary financial services, similar to what we have observed with Square's Cash App and PayPal's Venmo, Horgan wrote. — CNBC's Michael Bloom contri