Coinbase is well-positioned to weather the storm it's facing from the Securities and Exchange Commission and offers huge upside for investors, analysts at Canaccord Genuity (TSX:CF, LSE:CF) said.
In a note to clients Monday, the firm reiterated its Outperform rating and doubled its price target to $140 from $70. Shares of Coinbase fell 4.5% Tuesday to $94.15.
“While Coinbase remains a crypto lightning rod in many respects, we cannot but see the company gaining material momentum across a variety of different fronts, with some of them happening in just the last few weeks,” the analysts wrote.
The first is the success of Coinbase as a partner to asset managers in their ETF applications. The analysts noted that several such firms have recently entered into surveillance sharing agreements (SSAs) with the company.
“These new filings not only improve the outlook for approval in the near term but also underscore Coinbase's moat as the most trusted exchange with enough market share to be able to surveil the market,” analysts wrote.
Then there’s the matter of the SEC, which sued Coinbase on allegations of unlawfully facilitating the buying and selling of crypto asset securities. Another case recently delivered good news for Coinbase, analysts argued.
“The recent SEC vs. Ripple court ruling puts further doubt on the crux of the SEC's case against Coinbase, namely that most cryptos traded in the secondary market are securities,” the analysts wrote.
Essentially, the SEC is arguing that the cryptocurrencies users can exchange on Coinbase are effectively functioning like stocks. Earlier this month, Ripple Labs Inc was ruled to have not breached federal securities law by selling its XRP token on public exchanges.
Canaccord Genuity (TSX:CF, LSE:CF) also likes what it's seen out of the company thus far this year.
“We like the company's solid execution in Q1 with material cost-cutting and more focus on key parts of the business while being nicely profitable,” analysts wrote. “We believe there should be follow-through momentum again in Q2, and we are upping our estimates here ahead of the print.”
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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