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Analyst calls Coinbase a 'must own' stock, sees price going to $600

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Lisa Ellis, MoffettNathanson Senior Equity Analyst, discusses Coinbase's new partnership with Facebook for new 'Novi' cryptocurrency wallet.

Video Transcript

ZACK GUZMAN: Lisa Ellis, MoffettNathanson senior equity analyst, joining us once again on the show. And Lisa, of course, we bring you back in because before, when we were talking about it when it went public, you called it a must-own stock. And now a lot of different things to chat about when it comes to Coinbase, a lot of people talking today about the partnership with Facebook to work on their wallet. But now, I mean, I suppose you got your plethora of choices to choose why you could be so bullish on it now. So what does it all mean for Coinbase?

LISA ELLIS: Yeah, there's a lot going on right now with Coinbase. Very excited to see it back above $300. Took us a little while to get there, I guess. But yeah, there's a lot going on. There's their NFT marketplace is big news. Their recently announced partnerships with both Facebook and with the NBA, big news as well.

Of course, the implications of the ProShares ETF and then also the ongoing back and forth between Coinbase and the SEC related to the regulatory framework around crypto, all of these things just in the last, I'd say, 10 days or so. So, a lot going on. Very exciting.

I mean, I have to say, just to sort of set it up right, back in April or May, when we saw the last peak in Bitcoin, and everyone was anticipating that we'd go into the next, you know, crypto winter, so to speak, you know, we were expecting-- and I think many were-- a far steeper and more protracted decline in crypto assets more akin to what we saw back in 2017, 2018, where they dropped 60% peak to trough.

And for nine months, it lasted like that. So the fact that we're actually back here above 60,000, you know, only, you know, six or seven months later is-- yeah, it's actually a really-- it's a really positive outlook for the overall crypto ecosystem. So, good stuff and a lot going on.

ZACK GUZMAN: You could expect, I suppose, by extension, that Coinbase would be trading a bit higher, too, as Bitcoin comes back to its all-time high. Last I checked, you have a $600 price target on Coinbase. I mean, I was also kind of shocked to see 1.5 million customers waiting for their NFT product here. It's more than I think OpenSea has, if everybody does sign up. And that's a whole other revenue track for them versus just the trading fees. So I mean, when you piece it together, is $600 still the target that people should be expecting if all this continues-- this momentum continues?

LISA ELLIS: Yeah, we're sticking with our $600 price target. That's a revenue multiple based off of 2023 of revenues. And if anything, honestly, since we set that target back in April at the IPO, they've only beat the numbers since then, honestly. The market is still trying to figure out, I'd say, how to handle Coinbase because of the volatility in the business that's so linked to the volatility in the underlying crypto assets. The market doesn't quite know how to handle that. But certainly, if you're a longer term investor, if you can hold something for two to three or more years, this is a absolute no brainer in our view.

And the NFT marketplace is a good example of that. Our forecasts for Coinbase are only currently based off of the existing base, brokerage and exchange business. We don't make sort of arbitrary hand adjustments for these future streams of services. But the company is certainly rolling out loads of them. And the NFT marketplace is a great example of that, with $1.5 million, you know, folks already on the waiting list.

Interestingly, NFTs, I think, is an area where it's still a bit of an ambiguous part of the crypto ecosystem. But I was speaking recently with the head of crypto at Visa. And interestingly, he was commenting that their view and the view out in the Silicon Valley world is that NFTs really should be thought of as the next generation of e-commerce.

That NFTs will enable digital-based commerce of intangible goods, much in the same way that e-commerce unleashed, you know, the flow of physical goods in a very new way, that they really think of it as very similar to that in terms of unlocking economic growth at a whole other level. So, very exciting to see Coinbase rolling out their NFT marketplace.

ZACK GUZMAN: Yeah, as we've highlighted on the show, too, we've seen the NFT technology move beyond just digital art now into a lot of different space, whether it be tickets or fashion even, as we've spotlighted. But I guess, you know, let me throw a different question at you here, because some people watching this might say, well, if all the enthusiasm is here around the Bitcoin ETF, people can go out and buy that. Why do you need Coinbase anymore?

I would say that might be short-sighted when it comes to all the other altcoins out there that Coinbase offers. But what is maybe the dynamic there between all the different on-ramps being built out and the threat maybe that it poses for Coinbase being the original on-ramp for a lot of people here in the US?

LISA ELLIS: It's a very legitimate question. How ETFs will affect Coinbase and the direct purchasing of crypto assets is still a little bit TBD. On one hand, investing in crypto is still so new that having access to ETFs and just different types of exposure should just, you know, broaden out the interest and mainstreaming of crypto investing.

And there's still huge runway in that, right? Like, total value of crypto assets today is sitting somewhere between $2 or $3 trillion. The total AUM of things like gold or other commodities, real estate, you know, all these other alternative investments is more like $10 to $12 trillion. So we've comfortably got, you know, 5x scaling before we achieve some of those other alternative asset classes.

But it's an important dynamic because it's a good question as to whether the mainstream investor is going to just start buying ETF exposure to crypto and not outright own crypto assets through, like, a Coinbase wallet, which would potentially be a negative. To offset that, what we're hoping to see more of from Coinbase is things like the partnership they're doing with Facebook, where, increasingly, Coinbase plays, like, the underlying custody role, providing the underlying infrastructure for buying and selling crypto assets to institutions, as well as their retail business directly to consumers.

ZACK GUZMAN: And we're already seeing that with the news of the Facebook partnership as well. So some of that already coming true. We'll see how it all moves forward. Exciting times. Lisa Ellis, MoffettNathanson senior equity analyst, appreciate you coming back on. Keep us posted if that price target does change, move a little bit higher.