Coinbase Global Inc. is making progress on its efforts to be “more than an exchange,” and that’s one reason to be bullish on its stock, according to Needham analyst John Todaro.

He initiated coverage of Coinbase’s stock
COIN,
+4.26%

with a buy rating and $420 price target Tuesday, arguing that the company has “significant future opportunities beyond exchange services.”

Shares are roughly flat in midday trading Tuesday, after gaining as much as 1.7% earlier in the session.

Todaro highlighted the growth of Coinbase’s staking business, which the company says allows people to earn yield on their crypto assets. This part of the business grew sharply in the second quarter and he sees room for more expansion ahead as the company adds more staking assets and other yield-bearing offerings.

“COIN’s opportunities in staking, custody, and interest-bearing accounts will accelerate its positioning as a one-stop shop for crypto financial services, we believe,” he wrote.

Todaro added that “investor concerns are misplaced” when it comes to Coinbase’s fees because “the non-commoditized nature of crypto exchanges differentiates them from traditional brokerage firms, where fee compression has occurred in recent years.”

He said that institutional investors and retail traders seem most focused on factors like the availability of tokens, the reliability of a platform, and liquidity when determining where to conduct crypto activities. In Todaro’s view, Coinbase “has done a good job of offering new assets and new products in a regulatory compliant manner, maintaining uptime, offering deep liquidity pools, and ensuring exchange reliability, as evidenced by the lack of a successful exchange hack.”

Of the 24 analysts tracked by FactSet, Todaro is one of the 16 analysts with a bullish rating on Coinbase’s stock. Of the rest, six have the equivalent of a neutral rating and two have bearish ratings. The average price target is $374.23, about 46% above current levels.



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