Coinbase's Weak Q2 Is a Blip, Not a Breakdown, Says Benchmark
Analyst Mark Palmer reiterated his buy rating and $421 price target. He argued that the exchange's long-term investment case remains intact as the company continues to build foundational crypto infrastructure.
The shares are 1.8% higher in early trading Monday, after having closed 16.7% lower on Friday.
Benchmark highlights five catalysts supporting its thesis. First, Coinbase's revenue-sharing agreement with Circle on USDC reserves positions it to benefit from stablecoin adoption, especially after the U.S. passed the GENIUS Act.
Second, its institutional offerings, including prime brokerage, crypto-as-a-service and derivatives, are well-timed because the CLARITY Act may spur further adoption.
Third, the firm is developing a crypto 'super app' integrating trading, payments, non-fungible tokens (NFTs), decentralized finance (DeFi) and developer tools, a unique product in the U.S. market.
Fourth, the integration of decentralized exchanges expands token access beyond centralized listings.
Finally, Coinbase's estimated $360 million in July transaction revenue, a 44% jump from its monthly average during the second quarter, signals a potential recovery in crypto activity.
Benchmark concludes the quarter's miss is short-term noise. Coinbase's evolving platform, underpinned by regulation tailwinds and increasing institutional demand, points to long-term growth.
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However, it often ends with a breakdown, which is unlikely now but could occur in a few weeks. Making decisions has become increasingly challenging in the current climate of extreme volatility and uncertainty, underscoring the importance of maintaining a healthy cash position. A wise trading strategy is to watch for the next significant resistance level, which is close to $71, and take small profits gradually above the $69.75 level. On the other hand, a more desirable accumulation zone between $65 and $63 might appear if a breakdown pattern develops. Starting a modest position around the $65 support level may make sense for those looking for early exposure, particularly given the increasing likelihood that the Federal Reserve will lower interest rates in September, which could lead to a rebound. However, a more serious accumulation should be considered between $62 and $59.4. 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