Coinbase, Robinhood Upgraded by Barclays Analyst, Citing ‘Matured’ Business Models

As a seasoned crypto investor who has weathered numerous market cycles and witnessed the rise and fall of several digital assets, I find Barclays’ upgrade of both Coinbase (COIN) and Robinhood (HOOD) to equal weight from underweight as an encouraging sign for the future. Having closely followed these two companies since their inception, I can attest that they have indeed matured significantly, particularly in terms of product expansion and improved financial outlook.

Barclays, a major bank based in the UK, has raised its assessment of Coinbase (COIN) and Robinhood (HOOD) from ‘underweight’ to ‘equal weight’. This change was made due to improvements in their business strategies.

As per Barclays analyst Benjamin Budish, both companies have significantly grown and developed, largely due to their broadened product offerings and improved financial forecasts.

Coinbase might benefit significantly under a more welcoming regulatory climate, as both presidential candidates seem to be growing more favorable towards the digital assets sector. Additionally, with the green light given for several spot Bitcoin ETFs, Barclays suggests this could be advantageous.

In simpler terms, the analyst believes that although there are still potential threats for Coinbase, the improving conditions, strengthening financial reports, gradual expansion into various areas, clear dominance in the U.S. crypto market, and recent stock performance suggest a better balance between risks and rewards. As a result, they have decided to classify Coinbase as a stock with an equal weight.

As a researcher delving into the dynamic world of cryptocurrencies, I’ve witnessed the tumultuous journey the industry has undergone since the downfall of FTX and other prominent crypto entities in 2022 and 2023. Yet, amidst these challenges, Coinbase has shown remarkable resilience. Budish commends the company for its strategic cost management, particularly in maintaining a lean workforce, despite an uptick in activity during 2024.

According to Budish, the management team has been careful when it comes to hiring, resulting in a more gradual increase in costs compared to before. This cautious approach has enabled the model to gain additional profit due to the restrained spending on labor and expenses.

Additionally, he noted that Coinbase’s income streams are becoming more varied. Although trade fees and interest earnings continue to make up the majority of their revenue, other sectors like Blockchain incentives, safekeeping fees, and additional transaction charges have begun playing significant roles in the company’s earnings, as per Barclays’ assessment.

Analysts caution that although progress appears to be made for Coinbase, there’s still apprehension about various factors such as the overall economic climate and ambiguity over certain assets being considered securities, along with the ongoing legal dispute between Coinbase and the Securities and Exchange Commission (SEC) that has yet to be settled.

‘Increasingly turning around’

Analysts are observing comparable favorable trends in Robinhood’s business structure, suggesting potential growth in the future. Their optimistic view is based on several factors: the introduction of innovative products, the company’s growth into the UK and European markets, and a new customer base emerging from the upcoming acquisition of Bitstamp.

According to Barclays, the elements causing our ‘Underweight’ ratings are shifting, leading us to believe that the risks and rewards for these stocks are becoming more evenly balanced.