Coinbase Surges 23% on Regulatory Wins, Analyst Boosts Target to $421

Benchmark analyst Mark Palmer has raised his price target for Coinbase to $421 from $301, citing a transformative week for the company. The analyst noted that Coinbase is benefiting from favorable regulatory and legislative developments, both in the U.S. and overseas. In the U.S., the GENIUS Act aims to establish federal rules for stablecoins, while the MiCA license will allow Coinbase to offer a range of crypto services across 27 European Union countries.

Coinbase's share price surged by more than 23% last week as the company secured the MiCA license and the GENIUS Act was passed in the Senate. These developments are expected to significantly boost Coinbase's long-term growth prospects. Palmer reiterated a "Buy" rating for the company, explaining that a higher earnings multiple is justified given Coinbase's initiatives to capitalize on an improving operating environment.

With the MiCA license, Coinbase will be able to offer crypto trading, custody, staking, and payments services across 27 European Union countries. The company has chosen Luxembourg as the location for its European crypto hub. The GENIUS Act is particularly beneficial for Coinbase, as a significant portion of its business is tied to Circle's USDC stablecoin. Coinbase invested in the stablecoin issuer prior to its public offering and earns income from assets like backing the stablecoin with U.S. Treasuries.

In the first quarter of this year, Coinbase earned $300 million in stablecoin revenue, accounting for roughly 15% of the exchange’s total sales. The GENIUS Act is expected to facilitate increased adoption and use of stablecoins, which could be passed by the U.S. House of Representatives and signed into law by August, pending substantial changes. Coinbase earns 100% of the interest on USDC held directly on its platform and has unveiled a payments service leveraging the stablecoin. Additionally, USDC will become available as a form of collateral on its U.S.-regulated derivatives platform.

While stablecoins are a growing revenue stream, transaction fees remain Coinbase's main source of income. In the first quarter, transaction revenue fell 19% quarter-over-quarter to $1.26 billion due to macroeconomic uncertainties. However, Coinbase is exploring other ways to promote USDC's usage on its platform. Last week, Coinbase’s Chief Legal Officer Paul Grewal stated that tokenized stock trading is a "huge priority," aligning with recent moves from competitors.