Coinbase Global (NASDAQ:COIN) shares rose more than 2% pre-market today after BofA Securities analysts upgraded the company to Neutral from Underperform, raising their price target to $217 from $110.

The analysts noted that the current macro environment has positively impacted cryptocurrency market cap appreciation and trading volumes. They also highlighted Coinbase’s disciplined approach to expenses and its ability to benefit from operating leverage following significant expense cuts in 2022, which should help maintain profitability.

Additionally, the increased diversification of Coinbase’s revenue sources, which are less correlated with overall trading volumes, should reduce earnings volatility. However, the analysts also pointed out risks to this optimistic outlook, including Coinbase’s continued dependence on transaction revenue for profitability, which accounted for 66% of total revenue in Q1/24, and the regulatory uncertainty associated with the ongoing SEC lawsuit.

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