- Coinbase could surge 36% as it's the best way to invest in the cryptocurrency ecosystem, Goldman Sachs said in a note on Monday.
- The bank initiated Coinbase at a Buy rating with a $306 price target.
- "The continued success or failure of cryptocurrencies as an asset class will inevitably determine COIN's longer-term fate," Goldman said.
- Sign up here for our daily newsletter, 10 Things Before the Opening Bell.
Shares of Coinbase Global could surge 36% to $306 as the crypto-exchange platform represents the best way for investors to gain exposure to the crypto ecosystem, Goldman Sachs said in a note on Monday.
The bank admits that much of Coinbase's long-term trajectory will be determined by the success of failure of cryptocurrencies as an asset class, but believes the company represents "a blue-chip way through which to invest in the development of the ecosystem," according to the note.
Coinbase's crypto ecosystem is powered by its careful approach to regulatory compliance, its crypto-native technology stack and deep talent pool, and its role as an innovation hub for new crypto endeavors, Goldman said.
"While we believe the core business today offers an attractive growth profile with the potential to drive high levels of profitability, we see significant white space for new initiatives to drive more stable and recurring revenue streams to complement the core trading business over the longer term," Goldman explained.
That "white space" Goldman references includes exposure to innovations in DeFi, or decentralized autonomous blockchain applications, stablecoin-based payments, and the adoption of non-fungible tokens, or NFTs.
"If meaningful parts of the economy can transition to blockchain and crypto-native technology over time, we see significant opportunity for COIN to benefit from its status as a critical element of the financial infrastructure for the ecosystem," Goldman said.
In the meantime, continued user growth should drive strong growth in transaction revenues over time, which currently represent about 96% of Coinbase's annual revenue.
Shares of Coinbase have performed poorly since its direct listing in mid-April, which coincided with a top in the price of bitcoin. Coinbase is down 48% from its all-time high of $429.54, based on Friday's closing price. Shares were up more than 2% in Monday morning trades.