Wall Street analysts are bullish on Coinbase after the crypto exchange reported strong quarterly earnings Tuesday. Setting a medium-term price target for a stock tied closely to the price of a volatile cryptocurrency is still a new challenge for analysts. Coinbase is the first cryptocurrency exchange to trade on the public markets. Most of its revenue comes from trading fees, which tend to ebb and flow with the crypto markets. Analysts covering the stock understand the long-term nature of the young industry, though. Coinbase reported $3.45 per share , beating Wall Street forecasts by $1.12. The exchange reported $2.23 billion in revenue, topping the estimated $1.78 billion. That's not all that has analysts excited about the company's long-term prospects. They were keen to see evidence that Coinbase is reducing its reliance on bitcoin trading, which fell to 24% of its total trading volume. That's down from 39% in the first quarter. The company also showed it's expanding its capabilities. It began offering the Coinbase Card, launched Coinbase Cloud and began beta testing Coinbase Prime for institutional clients. The exchange also grew its user base, which analysts see as a measure of critical health for the business and adoption of cryptocurrencies broadly, and kept its pricing in tact despite concern about fee compression. Analysts also said the company's careful approach to regulation and compliance makes it well positioned to become a systemic part of the crypto ecosystem one day. Here's what analysts said about Coinbase: Compass Point – Neutral, price target $265 "COIN continues to expand its marketing efforts, customer service and overall investments in the platform, so expenses should continue to trend higher. We are cautious on the near-term environment given regulatory headlines/focus and the potential for pricing compression as the retail platform converges and institutional adoption increases – we would note we can make longer-term bull cases on all of these fronts for COIN over time." Oppenheimer – Outperform, price target $444 "Near term, fee compression seems overblown and crypto summer appears to arrive, which will revert the dislocation between fundamentals and valuation. Longer term whether we are at crypto winter or summer, we favor the crypto adoption trend and disruptive nature of digital assets. To us, Coinbase is an enabler of crypto innovation, and will have strong voice in the direction of digital asset development." Wedbush Securities – Outperform, price target $300 "On the surface, huge quarterly beat, despite a sequential decline in crypto assets on the platform, with September's MTU's expected to decline from the June quarter. We point to a number of positive factors: 1. The decline In crypto assets values on the platform seem to be a function of a quarterly fall in crypto prices, rather than, declining usage from institutional volumes; 2. While MTUs Are expected to decline in the September quarter, pricing recovery in crypto assets will provide a nice offset, contributing to Q3/CY21 revenues; 3. Annual revenue or fee per user is expected to reach record levels, pointing to the company's successful monetization efforts." D.A. Davidson – Buy, price target $400 "With the volume explosion in 1Q, COIN's take rates came down as volumes skyrocketed. Institutional rates are so small (~4 bps), they are largely insignificant, but retail take rate came down sharply (1.49% to 1.21%) as retail activity shifted from Coinbase to Coinbase Pro. This trend likely continued until the market drop in mid-May, but consensus 2Q estimates expected another significant leg down (1.12%)." JPMorgan – Overweight, price target $372 "Earnings generation is concentrated today in cryptocurrency transactions, but we see Coinbase expanding further into other cryptocurrency services… Secure custody has been a challenge for the industry, and Coinbase has a segregated and battle-tested institutional solution. We see opportunities for Coinbase to build out crypto cash management, lending, advice and other cryptocurrency services mirroring what we see as the profit centers of traditional brokerage. We see these offerings complementing a deeper presence for Coinbase in the cryptoeconomy including transaction and custody of NFTs, digital contracts, security token and smart contracts." Piper Sandler – Overweight, price target $335 "COIN looks to be on the right side of any pending regulation. COIN has emphasized that they work with and hope to incorporate regulation into the company's development. They have emphasized the efforts they have made to educate both regulators and lawmakers. And while we expect crypto regulation under SEC Chair Gary Gensler (and others like Congress and regulatory & governmental bodies) will ramp in the near to moderate term, we suspect the credibility that regulatory scrutiny will give to the crypto industry in the moderate to long term will far out weigh delays or minor setbacks it could drive in short term." Goldman Sachs – Buy, price target $337 "We view the take rates trends as constructive, including 1) retail take rates were actually up despite the increase in volume in the quarter, and could have further upward bias (in our view) in the near term if the lower volume environment in July drove take rates in Coinbase Pro into lower pricing tier, and 2) the company addressed concerns over the harmonization of platform pricing between Coinbase and Coinbase Pro and spoke to the importance of making sure that whatever pricing and platform harmonization they conduct between the platforms doesn't result in a significantly lower revenue run-rate, which we had previously viewed as a tail risk to pricing." BTIG – Buy, price target $500 "The upshot was that any enthusiasm regarding COIN's strong 2Q21 metrics was quickly dampened by management's disclosure that its MTUs and trading volumes had indeed been soft during July and only somewhat less so during early August, and as such the company's share price was flattish during extended trading. We were among those who had anticipated that investors would look through COIN's 2Q21 results regardless of how strong they were, a view informed by the fact that its stock price has essentially reflected sentiment regarding the crypto market since the company's direct listing in mid-April. COIN's shares had appreciated ahead of the 2Q21 print in sympathy with the recent rally in crypto prices." — CNBC's Michael Bloom contributed reporting.
Monitors display Coinbase signage during the company's initial public offering (IPO) at the Nasdaq MarketSite in New York, U.S., on Wednesday, April 14, 2021.
Michael Nagle | Bloomberg | Getty Images
Wall Street analysts are bullish on Coinbase after the crypto exchange reported strong quarterly earnings Tuesday.