Coinbase (COIN) Rallies 16% Ahead of Its S&P 500 Listing Next Week

Cryptoeconomy enabler Coinbase Global (COIN) rallied 16% over the past five days to celebrate its public listing on the S&P 500 index, scheduled for next week.

Cryptoeconomy enabler Coinbase Global (NASDAQ:COIN) rallied 16% over the past five days to celebrate its public listing on the S&P 500 index, which is set for next week.

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Coinbase's addition to the S&P 500 marks a historic milestone as the first cryptocurrency exchange included in the index, symbolizing a step toward mainstream acceptance of crypto. This move is expected to boost institutional interest and attract new capital, especially through passive funds that must buy S&P 500 components, effectively making Coinbase and, by extension, Bitcoin (BTC), a “must-own” investment.

However, while rosy developments are nice to see for existing shareholders, I remain neutral on the stock due to risks like potential overvaluation, declining earnings, revenue concentration, and increasing competition.

Fundamental Challenges Persist Despite S&P 500 Boost

Bernstein analyst Gautam Chhugani, who holds a Buy rating on Coinbase, estimates that its inclusion in the S&P 500 could attract approximately $16 billion in passive and active fund inflows, potentially boosting the stock further. However, with Coinbase's market capitalization having surged by $10 billion, it seems that much of this anticipated inflow may be priced in. The focus now shifts to the company's underlying fundamentals.

Coinbase earns revenue through transactions, subscriptions, and services, mostly derived from transaction fees such as spreads and retail trading fees. In its Q1 2025 earnings report published earlier this month, Coinbase experienced a 10% decrease in trading volume, resulting in total revenue of $2 billion—a 10% decline quarter-over-quarter—and transaction revenue falling 19% quarter-over-quarter to $1.3 billion.

The company attributed this decline to crypto market volatility and ongoing uncertainty. Ultimately, a substantial portion of Coinbase's performance remains closely tied to the health and activity of the cryptocurrency market.

Wider Crypto Story Fails to Live Up to the Hype

The narrative of widespread adoption of cryptocurrency necessarily implicates government involvement. Crypto enthusiasts hoped that President Donald Trump, a vocal supporter of cryptocurrencies, would help legitimize the space. However, despite this hope, meaningful legislation has yet to be realized. Trump's so-called "Strategic Bitcoin Reserve," which does not involve the administration actually purchasing any cryptocurrency, also fell short of expectations.

In fact, Trump appears to have leveraged cryptocurrency primarily for personal gain, as evidenced by recent meme coin promotions and family ventures. Meanwhile, Bitcoin trading remains banned in several countries, including China, Saudi Arabia, and Egypt. Recognizing its heavy reliance on Bitcoin, Coinbase is diversifying by expanding into more stable revenue streams such as custody services, staking, and institutional offerings.

Coinbase faces fierce competition in this uncertain landscape from exchanges like Binance, Kraken, Robinhood (NASDAQ:HOOD), Gate.io, and Gemini. Binance remains the global leader, holding a 38% market share as of April 2025. Each platform has its own strengths and weaknesses, catering to different user bases based on factors like geography and user experience. This makes the crypto exchange space highly competitive, with no single player being dominant enough to eliminate the rest. That said, Coinbase's early entry into the U.S. market and strong regulatory compliance provide it with a notable advantage domestically.

Despite experiencing a sequential revenue decline, Coinbase clearly did something right to earn its spot in the S&P 500. Coinbase remains profitable, and critically, has the financial strength to withstand short-term cryptocurrency volatility, as evidenced by a significantly improved debt-to-asset ratio.

What is the Target Price for Coinbase?

On Wall Street, COIN sports a Moderate Buy consensus rating based on 12 Buy, 11 Hold, and zero Sell ratings in the past three months. COIN's average price target of $264.19 represents potential upside of 8% over the next twelve months.

Earlier this month, analyst Ed Engel of Compass Point upgraded COIN to Hold with a price target of $195. The analyst expressed optimism and caution surrounding the emergence of altcoins. While he noted that altcoins could increase trading activity, he also recognized their structural challenges.

Oppenheimer's Owen Lau is more bullish on COIN, slapping an Outperform rating on the stock and a price target of $293. Oppenheimer believes the stock's inclusion has huge implications for Coinbase and the crypto industry as a whole. According to the analyst, getting into the S&P 500 not only increases purchases from index funds but also puts Coinbase under the closer radar of non-index funds that benchmark against the S&P 500.

Valuation and Volatility Call for Caution Despite Listing Milestone

Coinbase's inclusion in the S&P 500 marks a significant milestone for both the