Coinbase, Robinhood Upgraded by Barclays Analyst, Citing 'Matured' Business Models

• Barclays has upgraded both Coinbase and Robinhood to equal weight from underweight.
• Analysts at the British bank argued that both companies have "matured meaningfully."
• Coinbase, in particular, could profit from a friendlier regulatory environment as a result of the presidential election in November, Barclays said.

British banking giant Barclays has upgraded both Coinbase (COIN) and Robinhood (HOOD) to equal weight from underweight, citing better business models.

Both company’s stocks opened the day higher on Friday after the report was sent out overnight. The stocks later dropped more than 3% as bitcoin BTC$106,704.87 and broader crypto market index CoinDesk 20 fell.

According to Barclays analyst Benjamin Budish, both companies have “matured meaningfully,” particularly because of their product expansion and more positive financial outlook.

Coinbase, in particular, could profit from a friendlier regulatory environment, given that both presidential candidates have taken an increasingly friendly stance towards the digital asset industry, and with the approval of several spot crypto exchange-traded funds (ETFs), Barclays said in the note.

“While we continue to see risks for Coinbase, we think the improving environment, P&L profile, gradual but ongoing diversification, clear industry leadership in the US, and recent share performance point to a more balanced risk/reward, and we move to Equal Weight,” the analyst wrote.

The crypto industry has been through a lot since the collapse of FTX and some other then-major crypto companies in 2022 and 2023, but Coinbase has been resilient, the report stated. Budish applauds the company for keeping costs low, specifically related to its workforce even as activity has picked up in 2024.

“Management has been disciplined in their hiring and costs have grown much more modestly vs. prior, allowing the model to enjoy more incremental margin from this leverage,” Budish said.

He also mentioned Coinbase’s increasingly diverse sources of income. While the exchange still gets most of its revenue from trading fees and interest income, it has started seeing other areas of the business become a meaningful contributor, including Blockchain rewards, custody revenues and other transaction fees, Barclays said.

The analysts warn that while many things seem to be moving in the right direction for Coinbase, there remains uncertainty in the space, including the broader macroeconomic environment and regulatory unclarity regarding several assets being securities and the Securities and Exchange Commission’s (SEC) suit against Coinbase which has yet to be resolved.

'Increasingly turning around'

The analysts also see similar positive developments in Robinhood’s business model which could lead to future upside. The main reasons for his positive stance include new products, the firm’s expansion in the UK and Europe and new potential customers coming from the pending acquisition of Bitstamp.

“The factors that drove our Underweight ratings are increasingly turning around, and we now see the risk/reward for both stocks as more balanced,” Barclays said.