Bank of America (BAC) on Friday raised its recommendation on Coinbase (COIN) shares from underperform to neutral and raised its target price for Coinbase to $217 from $110, reflecting the positive outlook for the cryptocurrency exchange.
Following the announcement, COIN’s price rose 2.5% in the pre-opening market and 4.23% during the day.
Bank of America cites favorable market conditions
Bank of America’s decision to upgrade Coinbase is based on several factors. Analysts led by Mark McLaughlin cited a favorable macro backdrop that has supported cryptocurrency markets and increased transaction volumes.
They also highlighted Coinbase’s commitment to spending discipline and diversification as factors that could help improve earnings. Despite the increase, Bank of America analysts acknowledged potential risks that could limit share price growth.
One concern is Coinbase’s reliance on transaction revenues for profitability, which could pose a challenge if market conditions change.
In addition, ongoing litigation between Coinbase and the Securities and Exchange Commission (SEC) is creating regulatory uncertainty that could affect the company’s operations.
Shares of Coinbase fell more than 9% the previous day following reports that the Chicago Mercantile Exchange (CME) may enter the bitcoin spot trading market, potentially becoming a competitor to Coinbase and other exchanges.
KBW raises Coinbase’s target price to $230
In addition to Bank of America, investment banking firm KBW has also raised its target price on Coinbase. Last month, KBW praised Coinbase for offering investors a unique opportunity to capitalize on the long-term growth potential of the crypto economy.
In a research analysis, KBW raised Coinbase’s target price from $160 to $230, while maintaining its assessment of the market’s performance. Meanwhile, Coinbase has also faced serious regulatory issues.
Last month, Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York ruled that the SEC’s lawsuit against Coinbase could proceed.
The decision came after Coinbase filed a motion to dismiss the SEC’s case, which borders on allegations that the exchange is operating as an unregistered securities exchange, broker and clearing agency.
In her ruling, Judge Failla stated that the SEC’s lawsuit against Coinbase is based on “compelling” grounds.
“The Court finds that the SEC has sufficiently stated its position that Coinbase acts as an exchange, broker and clearing agency under the federal securities laws and, through its staking program, engages in the unregistered offer and sale of securities,” – The court document reads.
