Coinbase Stock Jumps on JPMorgan Upgrade Citing Base Network Growth Potential

Coinbase Global Inc. (COIN) saw a sharp increase in its stock after JPMorgan Chase upgraded the cryptocurrency exchange, noting potential monetization opportunities through the company’s Base network and USDC rewards program.

Coinbase’s Base Network Seen as a Key Growth Opportunity

JPMorgan upgraded Coinbase’s rating from “Neutral” to “Overweight” on Friday. Along with the rating change, the bank raised its price target for the cryptocurrency exchange to $404, implying roughly 14% upside from the current share price of about $354.

The bank noted that creating a Base token could allow Coinbase to capture value from the growth of its Ethereum-based Layer 2 network. Since its launch in 2023, the network has expanded rapidly. Data from DefiLlama shows it has surpassed $5 billion in total value locked and records more than 9 million daily transactions.

JPMorgan projected the Base network could achieve a market capitalization between $12 billion and $34 billion, with Coinbase potentially holding about 40% of the token supply. This would represent an equity value of $4 billion to $12 billion.

The projections match recent comments from Coinbase. Jesse Pollak, the creator of Base, mentioned last month that introducing a token could help advance decentralization and provide additional opportunities for developers. CEO Brian Armstrong also stated on X that the company is considering a Base network token as a way to support decentralization and encourage growth within the ecosystem but emphasized that no final decision has been made.

Margin Opportunities and Share Performance

JPMorgan also identified a margin opportunity from adjustments to Coinbase’s USDC rewards program. The bank suggested that narrowing interest rewards for most users while focusing benefits on Coinbase One subscribers could generate roughly $374 million in additional annual earnings, based on current USDC yields and interest rates.

News like this typically affects the stock price of companies in the sector, and Coinbase’s shares responded sharply to the upgrade:

• The company’s stock rose over 9% within 24 hours following the announcement.
• Year-to-date, Coinbase shares have gained 42.75%.
• The rise pushed the company’s market capitalization to $91.07 billion.

Meanwhile, Coinbase plans to publish its third-quarter earnings report on October 30. This comes after a second quarter that delivered mixed outcomes, with profit results below forecasts but improvements in several areas of operations, such as increased stablecoin holdings and stronger revenue from stablecoin-related activity. For the upcoming quarter, Zacks Investment Research forecasts earnings of $1.06 per share, a 71% increase year-over-year, and revenue of $1.74 billion, up 44.1% from the same period last year.