Coinbase or Robinhood share prices: which neo-broker to back?

The Robinhood [HOOD] and Coinbase Global [COIN] share prices have had a mixed start to the autumn. Although, despite the divergence, the latter is seen as lagging in the neo-broker race.

Coinbase’s share price has surged more than 30% since 29 September (through 19 October), with those gains being driven by the rise in the price of bitcoin against the dollar.

The cryptocurrency has gained almost 50% over the same period to hit $62,629.41 on 19 October. As bitcoin nears the 52-week high that it hit in mid-April, some market commentators expect that it could go higher this week as the first bitcoin futures ETF begins trading on the NYSE – the long-awaited ProShares Bitcoin Strategy ETF [BITO].

Meanwhile, Robinhood’s share price performance has been more muted. The stock slipped almost 1% since the start of October, closing at $41.70 on 19 October. But one analyst thinks that this could be the neo-broker to back

 

Autonomous backs Robinhood’s share price over Coinbase

Christian Bolu, a senior analyst at Autonomous Research, has a view on Coinbase and Robinhood’s share prices. Coinbase is “rapidly losing market share” as it lags on “almost every crypto innovation”, he wrote in a note to clients seen by SeekingAlpha.

Meanwhile, Bolu reckons Robinhood is the winner among neo-brokers, as it increases monetisation efforts to pump up top-line numbers. “After significant user growth in 2020/21, we expect future revenue growth to be primarily driven by increased monetisation (most notably in crypto and lending),” he wrote, after giving Robinhood an outperform rating.

“After significant user growth in 2020/21, we expect future revenue growth to be primarily driven by increased monetisation (most notably in crypto and lending)” - Christian Bolu, senior analyst at Autonomous Research

 

Bolu adds that international expansion could drive the next phase of growth for the online broker, with the average revenue per customer expected to triple in the next five years. Bolu has a $55 price target, which suggests a near 32% upside on the 19 October close.

Coinbase has the additional headache that SEC chairman Gary Gensler is not too impressed with crypto exchanges, saying many don’t comply with investor protection laws. The Biden administration has also stepped up its oversight of cryptocurrencies. Coinbase is reportedly pitching for a separate regulator to be set up for the crypto market, something that is unlikely to go down well with the SEC.

Bolu has pinned a $160 price target on Coinbase’s share price, suggesting a steep 47.6% downside on 19 October close. 

 

The bull case for Coinbase’s share price

Others are less bearish on the Coinbase share price. Analysts at JMP Securities published a research note on 15 October arguing that the crypto economy is entering the mainstream and the likes of Coinbase will provide the necessary infrastructure to make this happen.

“Despite the exponential scaling of adoption, we think the industry is still in its formative stage, and as use cases for crypto rapidly expand, we see tremendous upside for the companies (like Coinbase) that provide infrastructure to support this growth,” the analysts wrote.

“Despite the exponential scaling of adoption, we think the industry is still in its formative stage, and as use cases for crypto rapidly expand, we see tremendous upside for the companies (like Coinbase) that provide infrastructure to support this growth” - JMP Securities analysts

 

JMP Securities’ Devin Ryan told CNBC at the end of September that Coinbase could become an industry leader for years to come. The analyst has a bullish $300 price target on the stock and an outperform rating.

Needham analyst John Todaro believes that Coinbase will report strong third-quarter volume, according to a note seen by SeekingAlpha. Still, Todaro agrees that diversification of revenue channels is “what’s really going to get this stock going” if it is going to sustain its growth – noting derivatives trading as a laudable example. It could also help reduce the inherent volatility in Coinbase’s share price, which is tied to the price movements of cryptocurrencies.

 

Robinhood tests cryptocurrency wallets

On the other hand, Robinhood’s share price could benefit from expanding into cryptocurrency. In September, the online broker announced that it would test cryptocurrency wallets with a subset of its brokerage customers before rolling the feature out to its 32 million users.

Crypto has become increasingly important for Robinhood, accounting for $233m in revenue in the second quarter, up from $5m in the same period last year. According to the Financial Times, Robinhood’s share price gained 11% on 22 October, with the announcement signalling that it would be going toe-to-toe with Coinbase.

Looking wider, among the analysts tracking Coinbase’s share price on Yahoo Finance, the stock has a $370.25 price target, representing a 21% upside. Meanwhile, Robinhood has a $55.17 price target, suggesting a 32% upside.