Crypto exchange operator Coinbase (NASDAQ:COIN) came to market earlier this year in what was one of the more highly anticipated initial public offerings (IPOs) over the past several years. However, the stock struggled out of the gates, due in part to weakness in the price of bitcoin.
However, Coinbase stock is bouncing back and analysts are growing bullish on the name, providing some benefit to exchange traded funds like the ARK Fintech Innovation ETF (NYSEARCA: ARKF). In a testament to the flexibility offered by active management, ARK Investment Management accumulated shares of Coinbase immediately following the IPO, putting the stock in ARKF and some of its other active ETFs.
Today, ARKF is one of the largest ETF owners of the exchange operator. Coinbase is also the second-largest holding in that fund at a weight of 7.84%, trailing only Square (NYSE:SQ). That’s a positive for ARKF investors because analysts are warming to Coinbase.
On Tuesday, “Piper Sandler analyst Richard Repetto reiterated an Overweight rating and raised his target on the stock to $360 on Monday. The launch of futures ETFs is a sign that the Securities and Exchange Commission isn’t going to try to shut down all cryptos, he said. And the futures ETFs should lead to higher trading volumes for the currency over time,” reports Daren Fonda for Barron’s.
The first bitcoin futures ETF, the ProShares Bitcoin Strategy ETF (BITO), debuted last week, and it already has north of $1 billion in assets under management. That’s confirmation that investors are craving a bitcoin ETF, and it’s a sign that regulators are warming to the combination of crypto and the ETF wrapper. That could foster broader crypto adoption, in turn increasing interest in the asset class, which is a scenario that Coinbase could benefit from.
Citibank analyst Peter Christiansen is also bullish on Coinbase, initiating coverage of the ARKF component with a “buy” rating and a $415 price target. That’s significantly higher than the stock’s Oct. 26 closing price of $319.49.
“Coinbase should benefit from services beyond brokerage, including providing things like cold-storage wallets, markets for nonfungible tokens, or NFTs, new decentralized-finance applications, and lending, he said,” according to Barron’s. “Even assuming crypto prices stay flat, he said, the stock should reach $415, under a valuation based on the discounted value of Coinbase’s likely future cash flows.”
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.