Coinbase Stock Gains New Bull on ‘Underappreciated’ Growth Opportunities

Coinbase Global Inc. (NASDAQ:COIN) is attracting renewed market attention following a bullish initiation of coverage by BTIG, seeing the stock gain 2.33% in the pre-market. The stock's year-to-date surge of 31.21% hardly screams underappreciated, yet there may be areas of the business that have been overlooked according to the analyst.

The investment firm's positive outlook hinges on Coinbase's strategic investments in building a comprehensive platform linking its established trading operations with emerging digital asset applications.

BTIG initiated coverage with a ‘Buy' rating and a $410 price target, emphasizing the potential of Coinbase's rapidly scaling derivatives business and the Base App, which they believe are currently ‘underappreciated' by the markets. This endorsement arrives amidst a series of significant developments for Coinbase, each contributing to the evolving narrative surrounding the company's future.

A key strategic move was the acquisition of Deribit, a Dubai-based cryptocurrency derivatives exchange, for $2.9 billion. The deal, structured with $700 million in cash and 11 million shares of Coinbase Class A common stock, is designed to bolster Coinbase's presence in the burgeoning crypto derivatives market. This acquisition is expected to provide traders with expanded access to spot, futures, and options trading, aligning with Coinbase's broader strategy to diversify its offerings and capture a larger share of the market.

Coinbase also achieved a landmark milestone with its inclusion in the S&P 500 index. The markets reacted positively to this event, with Coinbase's stock experiencing a notable surge of over 8% in after-hours trading following the announcement. Inclusion in the S&P 500 reflects growing institutional recognition and acceptance of digital asset platforms within the traditional financial landscape.

Further expanding its global footprint, Coinbase registered with India's Financial Intelligence Unit (FIU), paving the way for the launch of its retail services in the Indian market. This move positions Coinbase to tap into a rapidly growing base of young investors eager to participate in the cryptocurrency market, reinforcing the company's commitment to international expansion and compliance with local regulations.

However, Coinbase has faced challenges, including a recent cybersecurity incident where cybercriminals stole personal data of its customers and demanded a $20 million ransom. The breach, involving external customer service agents being bribed, resulted in social engineering scams targeting users. Coinbase has committed to reimbursing affected users, with estimated remediation costs ranging from $180 million to $400 million. Following the news, Coinbase shares experienced a 6% dip, although they remained up 22% for the month.

Despite this setback, several Wall Street analysts have recently raised their price targets for Coinbase, indicating a more optimistic outlook for digital assets. Piper Sandler increased its price target to $350 from $190, while Cantor Fitzgerald raised its target to $500 from $292.

These upgrades cited growth in stablecoin revenue and Coinbase's position as crucial infrastructure for the cryptocurrency market as key drivers of their positive assessments. In the fourth quarter of 2024, Coinbase reported a return to profitability with a GAAP EPS of $1.04, surpassing Wall Street consensus estimates.

This marked the company's first profitable quarter after seven consecutive quarters of losses, driven by cost-cutting measures and increased revenue from subscription and services.