Coinbase Global Inc. (COIN) saw a sharp rise in its stock after JPMorgan Chase upgraded the cryptocurrency exchange's rating, highlighting potential monetization opportunities through the company's Base network and USDC rewards program.
In brief
- JPMorgan upgraded Coinbase's rating from Neutral to Overweight and raised its price target to $404, signaling confidence in the company's growth prospects.
- The bank anticipates margin gains from changes to Coinbase's USDC rewards program that could add approximately $374 million in annual profits.
- Coinbase shares jumped more than 9% after the upgrade, bringing their year-to-date gain to more than 42%.
Coinbase Base network seen as key growth engine
JPMorgan raised Coinbase's rating from “Neutral” to “Overweight” on Friday. In addition to the rating change, the bank increased its price target for the cryptocurrency exchange to $404, implying approximately 14% upside potential from the current stock price of around $354.
The bank noted that creating a Base token could allow Coinbase to capture value through the growth of its Ethereum-based Layer 2 network. Since its launch in 2023, this network has grown rapidly. Data from DefiLlama shows that it has surpassed $5 billion in total value locked and records more than 9 million daily transactions.
JPMorgan projected that the Base network could reach a market capitalization between $12 and $34 billionwith Coinbase potentially holding around 40% of the token's total supply. This would represent an equity value of $4 billion to $12 billion.
These projections match recent comments from Coinbase. Jesse Pollak, the creator of Base, mentioned last month that the introduction of a token could promote decentralization and provide additional opportunities for developers. CEO Brian Armstrong also said on X that the company is considering a token for the Base network as a way to support decentralization and encourage growth within the ecosystem, but stressed that no final decision has been made.
Margin opportunities and stock market performance
JPMorgan also identified a margin opportunity related to adjustments to Coinbase’s USDC rewards program. The bank suggested that reducing interest rewards for most users, while focusing benefits on Coinbase One subscribers, could generate approximately $374 million in additional annual profits, based on current USDC yields and interest rates.
News like this usually affects the stock prices of companies in the industry, and Coinbase shares reacted strongly to the upgrade:
- The stock price rose more than 9% in the 24 hours following the announcement.
- Year to date, Coinbase shares have gained 42.75%.
- This increase brought the company's market capitalization to $91.07 billion.
Separately, Coinbase plans to release its third-quarter earnings report on October 30. This follows a mixed second quarter, with lower-than-expected profits but improvements in several operational areas, such as increased stablecoin holdings and higher revenues related to stablecoin activities. For the coming quarter, Zacks Investment Research expects earnings of $1.06 per share, an increase of 71% year-over-year, and revenue of $1.74 billion, up 44.1% from the same period last year.
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