JPMorgan Sees 66% Profit Margin for Coinbase from USDC

JPMorgan has assigned a "neutral" rating to Coinbase (COIN.US) with a target price of $404. The bank highlighted several benefits that Coinbase derives from its investments in Circle and USDC. These benefits include the appreciation of Coinbase's minority stake in Circle and the use of USDC's high returns as a cost-effective customer acquisition tool. JPMorgan estimates that USDC's economic model is particularly attractive to Coinbase.

The bank noted that Coinbase's USDC on its platform generates high returns, and Coinbase's share of USDC outside the platform in Circle's reserve fund economics is essentially 100% profitable. In the first quarter of 2025, Coinbase is expected to receive distribution payments from Circle that exceed Circle's net income within the company by approximately $300 million. JPMorgan calculates that Coinbase generates a 66% profit margin on its USDC revenue. Given Circle's market capitalization of $55 billion, JPMorgan estimates that the economic value of Circle to Coinbase shareholders ranges from $5.5 billion to $6 billion.

JPMorgan's analysis suggests that investors may be underestimating the value that USDC and Circle bring to Coinbase. The bank's neutral rating reflects a balanced view of Coinbase's current position and future prospects, considering the potential upside from its investments in Circle and USDC. The target price of $404 indicates that JPMorgan sees limited upside potential for Coinbase's stock in the near term, but the bank acknowledges the long-term benefits that Coinbase could derive from its strategic investments.