Coinbase Stock Upgraded by Daiwa Analysts Amid Positive Earnings

Coinbase's Financial Performance

Daiwa analysts have upgraded Coinbase's stock rating to Buy from Hold, elevating its price target to $65. This decision follows the crypto exchange's strong first-quarter results. Coinbase reported a 23% quarter-over-quarter revenue increase, reaching $773 million, surpassing consensus estimates by 18%. The adjusted EBITDA turned positive at $284 million, contrasting sharply with the expected negative $9 million.

Key Drivers of Growth

The analysts attribute Coinbase's performance to a better-than-expected retail trading spread and robust interest income. Even without the $241 million interest income in the first quarter of 2023, Coinbase's core business remains profitable, with a positive adjusted EBITDA of $43 million. This indicates effective management and operational efficiency, despite significant restructuring efforts that reduced the workforce by 29% year-over-year.

Market and Regulatory Outlook

Daiwa suggests that the current share price largely reflects the uncertainty surrounding U.S. regulations. However, it underestimates Coinbase's recovering profitability, global expansion acceleration, and innovations in crypto-native services. These factors position Coinbase as a resilient player in the cryptocurrency market.

Market Reaction

Despite the upgrade, Coinbase shares experienced a premarket decline of over 3%, influenced by a drop in Bitcoin's price, which fell by over 2% to approximately $27,850. This demonstrates the interconnected nature of cryptocurrency markets and the impact of Bitcoin's price movements on related stocks.