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Bank of America (BAC) has upgraded its rating on Coinbase (COIN) shares from underperform to neutral as of Friday and has increased its price target for Coinbase to $217 from $110, indicating a favorable outlook for the cryptocurrency exchange.
In the wake of this announcement, the COIN price experienced a 2.5% increase in pre-market trading and has risen 4.23% throughout the day.
Bank of America Points to Positive Market Conditions
The rationale behind Bank of America’s upgrade of Coinbase is grounded in multiple factors.
Analysts, led by Mark McLaughlin, noted the advantageous macroeconomic environment that has bolstered the cryptocurrency markets and enhanced trading volumes.
They also emphasized Coinbase’s focus on cost management and diversification as elements that could lead to better earnings.
Despite the upgrade, analysts from Bank of America recognized potential risks that may restrict the stock’s growth.
.@BankofAmerica raised @coinbase to neutral from underperform and boosted its price target to $217 from $110.
The current macro backdrop has been positive for crypto market cap growth and trading volumes, the report said.https://t.co/NmgKwuCW0R pic.twitter.com/OOQXqNRgRU
— ICO Drops (@ICODrops) May 17, 2024
One issue is Coinbase’s dependence on transaction revenue for its profitability, which could present challenges if market conditions shift.
Moreover, the ongoing litigation between Coinbase and the U.S. Securities and Exchange Commission (SEC) introduces regulatory uncertainty that may affect the company’s operations.
Coinbase shares had fallen over 9% the previous day following news that the Chicago Mercantile Exchange (CME) might enter the spot bitcoin trading market, potentially becoming a competitor to Coinbase and other exchanges.
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KBW Raises Coinbase Price Target to $230
In addition to Bank of America, investment banking firm KBW has also raised its price target for Coinbase.
Last month, KBW praised Coinbase for providing investors with a distinctive opportunity to engage with the long-term growth potential of the crypto economy.
In a research report, KBW increased its Coinbase price target from $160 to $230 while keeping its market performance rating intact.
At the same time, Coinbase has encountered its share of regulatory challenges.
Last month, Judge Katherine Polk Failla of the US District Court for the Southern District of New York ruled that the SEC’s lawsuit against Coinbase may proceed.
This ruling followed Coinbase’s motion to dismiss the SEC case, which involves allegations that the exchange operates as an unregistered securities exchange, broker, and clearing agency.
In her decision, Judge Failla stated that the SEC’s lawsuit against Coinbase had “plausible” grounds.
“The Court finds the SEC has sufficiently pleaded that Coinbase operates as an exchange, as a broker, and as a clearing agency under the federal securities laws, and through its Staking Program engages in the unregistered offer and sale of securities,” the court document indicated.
As reported, Kathryn Haun, a former Assistant U.S. Attorney and partner at Andreesen-Horowitz, has resigned from Coinbase’s board.
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