Crypto Exchange Coinbase Had a Blowout First Quarter: Analysts

• Coinbase had a blowout first quarter as crypto market conditions improved, analysts said

• Canaccord and KBW raised their price targets while maintaining their ratings.

• Coinbase shares slipped 3.7% in premarket trading on Friday.

Coinbase (COIN) had a blowout first quarter as it benefited from improving crypto market conditions and business diversification efforts, broker JMP said in a research report on Thursday.

The crypto exchange reported first-quarter net income of $1.2 billion and diluted earnings per share (EPS) of $4.40. Earnings included a mark-to-market gain of about $650 million on crypto assets held for investment. The world’s largest cryptocurrency, bitcoin (BTC), gained more than 34% in the first quarter, while the CoinDesk 20 Index (CD20) rose nearly 17%.

The broker reiterated its market outperform rating and $320 price target. Canaccord Genuity raised its price target to $280 from $240 while maintaining its buy rating. KBW also raised its price target, boosting it to $240 from $230 and reiterated its market perform rating. The shares were 3.6% lower at $220.62 in early trading on Friday.

“While we believe investors must remain level-headed around the ebbs and flows of enthusiasm into the industry, which often coincide with fluctuations in price, we see a number of underlying trends supporting our positive thesis that Coinbase will be a relevant player in virtually all aspects of the crypto economy,” JMP analysts led by Devin Ryan wrote.

Several areas that JMP is most excited about for Coinbase include the introduction of its smart wallet, Coinbase Prime, and its growing international opportunity.

Consumer and institutional transaction revenue grew 101% and 133%, respectively, from the quarter before, Canaccord Genuity said in a report on Thursday.

This growth was “driven by improved broader market activity from spot exchange-traded funds (ETFs) alongside continued investment in product offerings and active user growth,” analysts led by Joseph Vafi wrote.

The broker said it was encouraged by launch and traction around Coinbase’s layer-2 blockchain, Base. “We believe the launch of this layer 2 can help solidify COIN’s leading position by being able to drive low-cost transactions across what is a growing user/AUM base.”

Coinbase also posted strong growth balances for the USDC stablecoin, both on its platform and in total market cap, and this generated $197 million of revenue, broker KBW said in a Friday report . USDC is a stablecoin issued by Circle, which is itself backed by Coinbase. The company earns gross interest income on USDC outstanding balances.

Looking ahead, KBW said it is cautious on USDC balances due to the recent rapid growth of the business and its “assumption that balances will eventually subside once rates begin to fall, though the consensus higher-for-longer narrative has likely extended the longevity of USDC balances in the near term.”