Goldman Sachs gives Coinbase a buy rating with a target price of $306 in the next twelve months!

According to CNBC, analyst Will Nance from investment bank Goldman Sachs issued a buy rating on Coinbase's stock in an investment report to clients yesterday, stating that buying Coinbase stock is the best way to gain exposure to the cryptocurrency ecosystem.

Goldman Sachs Bullish on Coinbase

After Coinbase went public on April 14, the company's stock (COIN) surged to over $400 on the first day, but its performance since then has been lackluster, closing around $224 yesterday, nearly halving from its peak of $428. However, following the significant drop in stock price, investment banking giant Goldman Sachs issued a buy rating on Coinbase stock. Goldman analyst Will Nance gave a target price of $306 for the next 12 months in the report, implying a 36% increase from yesterday's closing price.

While cryptocurrency remains a nascent ecosystem, Goldman Sachs stated that they are observing the growth and adoption of technologies such as stablecoin-based payments, decentralized finance (DeFi) or decentralized autonomous organizations (DAOs), non-fungible tokens (NFTs), and asset tokenization. Coinbase stock is seen as the best exposure to the cryptocurrency ecosystem. The analyst wrote:

"If significant parts of the economy can transition over time to blockchain and cryptocurrency technologies, Coinbase, as a critical financial infrastructure in the ecosystem, has tremendous potential for profit opportunities."

Significant Future Business Potential

In addition to Coinbase's position and role in the blockchain ecosystem, Goldman also sees robust growth in the company's trading revenue. They predict that continued strong user growth in the short term will further drive steady business growth. Furthermore, the Goldman analyst pointed out that people overestimate the impact of token prices like BTC and ETH on Coinbase. Similar to traditional stock or securities brokerage firms, what truly drives Coinbase's revenue growth is the volatility itself, not the price.

Although only 4% of Coinbase's current revenue comes from non-transaction activities, Goldman believes that in the long run, fee income will not be the company's sole revenue source. More additional services (such as margin trading) are expected to be introduced in the future, achieving further business growth.

"While we believe the current core business provides substantial revenue growth and the potential to drive high levels of profitability, we see significant whitespace in the business that is likely to drive more stable and recurring cash flow income in the future."

However, Goldman also emphasized that there are still some key risks to watch for Coinbase, such as regulatory policies in the cryptocurrency space, reduced volatility, declining token prices, and decreasing fee rates.