Morgan Stanley's raise and Citizens JMP's cut leave Coinbase targets $22 apart

Before the Oct. 9 notes, the two firms were $75 apart, with Citizens JMP at $325 and Morgan Stanley at $250 ^[21]. Most of the narrowing came from one side. Citizens took 13.8% off its number while Morgan Stanley added 3.2%, so the bull supplied $45 of the $53 ^[22]. Neither firm changed its rating ^[1][3].

The ratings and the targets rank the firms differently. Morgan Stanley's Equal Weight comes with a target 50% above the $172 close ^[2]. According to MarketBeat, Goldman Sachs reiterated a Buy that week at $244 and Cantor Fitzgerald kept an Overweight at $212 on Aug. 31 ^[8]. Those targets are roughly 41.9% and 23.3% above the same close ^[23]. On these figures, a neutral call from Morgan Stanley implies more upside than two positive ones. The Fly reported that the raise was part of an earnings preview covering brokers, exchanges and capital markets infrastructure companies ^[6]. The bank had begun coverage on Sep. 10 at $250 ^[7].

On the reported lines, the quarter both firms are pricing was weak. A decline of 18.5% to $1.22 billion implies year-earlier revenue of about $1.50 billion, a drop of roughly $277 million ^[24]. Revenue also came in about $70 million below the $1.29 billion estimate MarketBeat recorded ^[25], and the loss per share was $1.36 against an expected $0.44 ^[11]. The net loss was $359.5 million ^[12]. Adjusted EBITDA was $207.8 million, the 14th straight positive quarter on that measure ^[16].

Chief financial officer Alesia Haas said: "The Everything Exchange is delivering real revenue, not just green shoots, and starting to yield tangible diversification." ^[17] She also said expenses came in below the midpoint of guidance in every major category ^[20]. Transaction revenue was $599 million, and $452 million of it came from consumer trading ^[13]. That is about three-quarters of the line ^[27].

The new products include equities, derivatives and event contracts, among them commission-free stock and ETF trading for eligible US customers 24 hours a day on weekdays ^[18]. Coinbase also faces state challenges over prediction markets ^[19]. The coverage does not break out derivatives revenue, so the reported figures cannot separate derivatives growth from everything else either firm is valuing.

There are three ways this can go. If consumer revenue falls again at anything near the 30.5% pace ^[13], the targets have room to come down toward the price. A non-trading share well past 40% ^[5] would give the price room to rise toward the targets. If neither happens, the analysts can keep closing on each other while the stock sits near $172 ^[2].

I think the two firms now disagree mostly about timing. Citizens cut because of the execution still ahead, and it still holds the highest target named here ^[5][3]. The counter-case is Morgan Stanley's rating. A neutral call on a 50% implied gain ^[2] is a judgement about risk, and the target by itself does not show it. The view is wrong if the next report shows revenue down again from a year earlier and both targets hold, because then neither firm is pricing the revenue line at all.