Coinbase: Increasing Our Fair Value Estimate to $130 on Continued Cryptocurrency Strength

We are increasing our fair value estimate for Coinbase to $130 per share from $110, which translates to 32.8 times our 2024 earnings projection. Around $15 of the increase comes from higher expected transaction revenue expectations. Cryptocurrency markets have extended their rally into 2024, with Bitcoin reaching new all-time highs. Coinbase's results have historically been highly correlated with cryptocurrency valuations, and we do not expect this time to be an exception, with the firm's recent trading volume coming in far above 2023 levels. Given current market conditions, our near-term expectations for Coinbase are no longer realistic as the firm is likely solidly profitable now. Additionally, about $5 of our positive adjustment comes from higher interest income assumptions from Coinbase's participation in USDC. USDC's market capitalization has fully stabilized now, increasing to around $30 billion from a low of $25 billion last year, ending a period of steady outflows. We still expect interest income to decline in 2024 and 2025 due to lower interest rates, but the stable coin is clearly on better footing now.