Why Goldman Sachs expects Coinbase’s stock to rise another 11%

Goldman Sachs said it “underestimated” crypto exchange Coinbase, as the investment bank upgraded its rating on the company’s stock from to neutral from sell on Thursday — though it still expressed doubts about a use case for crypto.

The bank raised its price target on Coinbase’s stock to $282 from its previous target of $170. The shares were trading at $254.10, up 4.7%, on Friday afternoon Eastern time and about 11% below Goldman’s new price target.

Goldman’s change of tone is the latest in a series of positive forecasts for US-based Coinbase as Bitcoin roars back to all-time highs. On Friday, the leading cryptocurrency broke its previous record to reach $69,200 — up 330% from a 2022 low of $16,000.

In February, Coinbase posted its first quarterly profit in two years, prompting rating upgrades from JPMorgan, Oppenheimer, and others.

Coinbase shares have rallied 326% since Goldman added the stock to its sell list in June 2022. The stock has outperformed Bitcoin by 190% since that time, according to Goldman.

Profitability outweighs lack of use case

The rally cemented Coinbase as an industry leader, but despite the company’s profitability and a thriving crypto market, Goldman still expressed doubts about crypto’s mainstream use.

“We still see limited use cases for crypto at present,” the firm noted, although it said that the recent surge in crypto prices “significantly outweighed” a lack of mainstream adoption.

Goldman analysts also acknowledged Coinbase’s “commitment to managing towards more consistent profitability over time, which we had underestimated.”

According to Quinn Thompson, head of capital markets and growth at Maple Finance, Coinbase’s shrewd management has enabled it to survive while others have failed.

Coinbase’s “top US competitors are all nearly obsolete,” Thompson wrote in a X post on Wednesday. “FTX gone, Gemini a shell of its old self. Kraken lagging way behind.”

Thompson also pointed to Coinbase’s growing domestic market and international expansion as positives.

Goldman’s analysts, meanwhile, attribute Coinbase’s survival to a “historical focus on regulatory compliance.”

Despite the exchange’s efforts to be a compliance leader, it has regularly butted heads with the Securities and Exchange Commission. Time will tell if Coinbase wins out against the agency — and if Bitcoin’s rally will keep it profitable.

Tyler Pearson is a junior markets correspondent at DL News. He is based out of Alberta, Canada. Got a tip? Reach out to him at ty@dlnews.com.