JPMorgan analysts raised their price target for Coinbase Global (NASDAQ:COIN) to $181 from $171, while maintaining a Neutral rating on the stock, ahead of the company’s Q2/24 earnings, scheduled to be reported on August 1. The analysts adjusted the model to reflect recent developments in the crypto ecosystem.
The approval of U.S. Ether spot ETFs in May provided a boost, though the overall market saw contractions in April and June, resulting in mixed performance for the quarter.
According to TradingView data, the total crypto market cap fell by 14% in Q2/24, which was slightly better than expected. This improvement led to an increase in estimated assets under custody (AUC) by about 2% to $302 billion. The analysts project transaction revenue to be around $720 million, with retail spot fee rates at 160 basis points and institutional fee rates at 3 basis points.
Data from CCData indicates that Coinbase's total trading volumes in Q2/24 reached $218 billion, down 29% sequentially but up 136% year-over-year. The analysts expect a shift towards lower fee rate institutional volumes, particularly due to the interest in spot Bitcoin ETFs, which attracted approximately $2.4 billion in new capital during the quarter, despite a decrease in ETF trading volumes.
The analysts also noted a significant slowdown in the velocity of spot trading, falling below the quarterly average over the past five years. Conversely, Coinbase's derivatives products showed more resilience, with volumes and transaction fees down by about 15-20% sequentially in Q2 2024.
Activity on Coinbase's Base platform slowed during the quarter, but profitability surged following Ethereum's Dencun Upgrade in mid-March 2024, which significantly reduced the cost of transactions on Ethereum's Layer-2 chains. This was the first full quarter post-upgrade, leading to nearly 100% margins on Base-related revenue, with net Base fees estimated at $20 million for the quarter.
Expenses are expected to align with the Q2 outlook, resulting in an adjusted EBITDA margin of approximately 42%. The analysts remain Neutral on Coinbase, with the updated December 2024 price target of $181 reflecting a higher assumption for the total crypto market cap.