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Bullish Coinbase Analyst Has Some Bad News About 2022 -- Barrons.com

Dow Jones Newswires ·  Apr 13, 2021 20:39

DJ Bullish Coinbase Analyst Has Some Bad News About 2022 -- Barrons.com


By Avi Salzman

An analyst has weighed in on Coinbase Global ahead of its direct public listing on Wednesday, and she's bullish.

But her report also makes a projection that might unsettle some Bitcoin bulls: Next year could bring a new Bitcoin winter when the value of digital coins fall sharply.

MoffettNathanson analyst Lisa Ellis initiated coverage of Coinbase with a Buy rating and a $600 one-year price target -- equating to a market cap of $123 billion. She values the company based on expected revenue, giving it a multiple of 18 times 2023 sales. That's not very far off from Square (ticker: SQ), which she calculates trades at 14 times 2022 sales and at 11 times 2023 sales.

A reference price for Coinbase's direct listing was set at $250 on Tuesday evening, which would indicate a market cap of $65.3 billion.

Ellis notes, however, that Coinbase's revenue is closely tied to the overall size of the cryptocurrency market and retail enthusiasm for cryptocurrencies. And she expects that market to continue to swing wildly.

Indeed, "it is quite likely that we are currently nearing a peak -- at $1.8 billion, Coinbase's revenues in the first quarter were 40% higher than all of 2020 ($1.3 billion)," she wrote. "To be prudent, we are assuming that the value of cryptocurrencies will continue to be cyclical, so we are assuming Coinbase's 2022 revenues will be more than 35% lower than 2021."

Such a sharp drop in revenue is rare for a fast-growing company, but it only serves to highlight how much Coinbase is dependent on the growth of the broader market. On Tuesday, Bitcoin hit a new high above $63,000.

Coinbase investors might look to the exits if the crypto market struggles. "At this point, we don't know how well the equity markets will stomach this level of volatility in Coinbase's performance," she wrote.

Ellis estimates that the total value of the crypto market will fall to $1.38 trillion in 2022, implying a 30% drop from current levels. Ellis did not respond to an email asking what her private targets might be for Bitcoin and Ethereum.

The drop in crypto market will be short-lived, however, with the market cap more than doubling the following year to $3.65 trillion, she projects. And by 2026, Ellis expects the market cap to expand to $11 trillion.

"This outlook for an approximately 36% through-cycle compound annual growth rate (CAGR) for industrywide crypto trading volumes is the primary driver of our Coinbase forecast," she wrote. Ellis expects Coinbase will grow its assets under management about in line with the broader crypto market.

Write to avi.salzman@barrons.com

(END) Dow Jones Newswires

April 13, 2021 17:18 ET (21:18 GMT)

DJ Bullish Coinbase Analyst Has Some Bad News About 2022 -- Barrons.com


By Avi Salzman

An analyst has weighed in on Coinbase Global ahead of its direct public listing on Wednesday, and she's bullish.

But her report also makes a projection that might unsettle some Bitcoin bulls: Next year could bring a new Bitcoin winter when the value of digital coins fall sharply.

MoffettNathanson analyst Lisa Ellis initiated coverage of Coinbase with a Buy rating and a $600 one-year price target -- equating to a market cap of $123 billion. She values the company based on expected revenue, giving it a multiple of 18 times 2023 sales. That's not very far off from Square (ticker: SQ), which she calculates trades at 14 times 2022 sales and at 11 times 2023 sales.

Ellis notes, however, that Coinbase's revenue is closely tied to the overall size of the cryptocurrency market and retail enthusiasm for cryptocurrencies. And she expects that market to continue to swing wildly.

Indeed, "it is quite likely that we are currently nearing a peak -- at $1.8 billion, Coinbase's revenues in the first quarter were 40% higher than all of 2020 ($1.3 billion)," she wrote. "To be prudent, we are assuming that the value of cryptocurrencies will continue to be cyclical, so we are assuming Coinbase's 2022 revenues will be more than 35% lower than 2021."

Such a sharp drop in revenue is rare for a fast-growing company, but it only serves to highlight how much Coinbase is dependent on the growth of the broader market. On Tuesday, Bitcoin hit a new high above $63,000.

Coinbase investors might look to the exits if the crypto market struggles. "At this point, we don't know how well the equity markets will stomach this level of volatility in Coinbase's performance," she wrote.

Ellis estimates that the total value of the crypto market will fall to $1.38 trillion in 2022, implying a 30% drop from current levels. Ellis did not respond to an email asking what her private targets might be for Bitcoin and Ethereum.

The drop in crypto market will be short-lived, however, with the market cap more than doubling the following year to $3.65 trillion, she projects. And by 2026, Ellis expects the market cap to expand to $11 trillion.

"This outlook for an approximately 36% through-cycle compound annual growth rate (CAGR) for industrywide crypto trading volumes is the primary driver of our Coinbase forecast," she wrote. Ellis expects Coinbase will grow its assets under management about in line with the broader crypto market.

Write to avi.salzman@barrons.com

(END) Dow Jones Newswires

April 13, 2021 20:04 ET (00:04 GMT)

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