There’s still lots of upside in Coinbase shares despite the recent volatility within the broader crypto market, according to Oppenheimer. While reiterating the cryptocurrency exchange as overweight, analyst Owen Lau lowered the price target to $89 from $107 to reflect growing industry risk stemming from a collapsed deal between exchanges Binance and FTX. Still, that target implies upside of 93.6% from Wednesday’s close. The stock has plummeted 81.8% in 2022. Binance walked away from a proposed deal to acquire rival FTX , which was facing a “liquidity crisis,” due to concerns surrounding FTX allegedly mishandling customer funds and U.S. agency investigations into the company. Bitcoin hit a low not seen since 2020 as the crypto market responded to the chaotic moves. “The crypto industry has been going through a calamitous hurricane from the fallout of FTX,” Lau said in a note to clients. “It has turned from a Bear Stearns moment when Binance signed a non-binding LOI, to a Lehman Brothers moment when Binance walked away from the deal one day after.” Lau said Coinbase has said it has “very little exposure” to FTX, which is considered to be on the brink of collapse. Its relationship with the company amounts to about $15 million worth of deposits to facilitate business operations and client trades, but it has no loans. While Coinbase was not directly involved in the failed FTX and Binance deal, he said the whole crypto market could be impacted negatively by increasing uneasiness among investors or enhanced government interest. But that could give way to benefits for the stock. In the near term, Coinbase will benefit from capitulation and panicked selling because of results in an increase in daily volume. But that could result in lower trading revenue. The company could also take market share from FTX. The newest shake-up reiterated the need for platforms that are transparent and sustainable as opposed to ones that emphasize having zero fees or high-yield products through risky bets, Lau said. When all is said an done, Lau said Coinbase has a strong balance sheet and the lowered price target is a result of current industry-wide volatility that does not necessarily reflect Coinbase’s position. “While we lower our PT, it is mainly driven by the challenge facing the industry,” he said. “Indeed, we need more crypto companies using COIN’s compliant and transparent model. However, a step back of crypto adoption, sustained low crypto prices, enhanced regulatory scrutiny, and contagion related to FTX collapse are likely to follow. But, longer term, the industry will learn the lesson and move forward.” — CNBC’s Michael Bloom contributed to this report.
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