Coinbase (COIN) stock has reversed in a big way over the past few weeks, falling over 20% from its all-time high just north of $350. This isn’t the first time the top cryptocurrency exchange platform has fallen under such considerable selling pressure.
Earlier in the year, shares tumbled after an explosive start out of the gate, eventually shedding around 35% of its value. Although Bitcoin and various other cryptocurrencies have been choppy, the trajectory has been upwards. Coinbase stock seems to be stuck below the $350 level of resistance. Indeed, surging cryptocurrencies bode well for business, but as various other cryptocurrencies run out of steam or trading action stalls, Coinbase could prove to be a brutal hold.
Undoubtedly, cryptocurrencies can be quite cyclical. It’s tough to tell when the next crypto crash will come and how long it will take trading activity to recover. However, as more firms take cryptocurrencies seriously as a means of exchange, one has to think that Coinbase is a decent play for broader cryptocurrency exposure.
Who’s the New Cryptocurrency Firm on the Block?
Undoubtedly, Jack Dorsey’s Block (SQ), formerly known as Square, is setting its sights on cryptocurrencies and the blockchain. Dorsey’s passion lies with Bitcoin. So much so that the man left Twitter (TWTR).
Eventually, Block could shape up (please, forgive the pun!) to be a massive rival for the likes of Coinbase. In any case, the rapidly-growing cryptocurrency asset class isn’t just one firm’s for the taking. Indeed, like the metaverse, there could be many winners, and I believe Coinbase could be one of them. For that reason, I am neutral on the stock, but would consider changing my stance should COIN stock fall closer to $200 per share.
Coinbase Stock: A Better Way to Bet on Cryptocurrencies?
Square’s rebranding to become Block comes with a strategic pivot towards a broader crypto-focused viewpoint. The strategic pivot is bound to get more of Jack Dorsey’s attention now that he doesn’t have to be so involved with social-media firm Twitter. Undoubtedly, Dorsey is a visionary, and he may view cryptocurrencies as one of the top technological themes for the 2020s.
As one of few publicly-traded crypto pure-plays, Coinbase is a name that could benefit from such a transition, even if the space stands to get more crowded with time. There are a growing number of cryptocurrencies, some of which may be prone to blowing up (think the Squid Game token), and with Coinbase, you don’t need to worry about single token risks.
Sure, you could just bet on Bitcoin itself, but Coinbase, I believe, is a better, and possibly safer way to play the growing adoption of the broader crypto universe, which is sure to mature and improve by leaps and bounds over the coming years. Today, Bitcoin may be the gold standard. Tomorrow, it may be Ether, or something that’s not on investors’ radars yet, or possibly something that’s yet to launch.
In any case, cryptocurrencies are ridiculously volatile, changing hands at a rampant rate, a trend that’s unlikely to change anytime soon. While there are long-term cryptocurrency investors, the asset class is more of a trader’s playground. With that, Coinbase is well-positioned to continue thriving as it expands into new crypto-related verticals through acquisitions.
Wall Street’s Take
According to TipRanks’ consensus analyst rating, COIN stock comes in as a Strong Buy. Out of 16 analyst ratings, there are 13 Buy recommendations, 2 Hold recommendations, and 1 Sell recommendation.
As for price targets, the average Coinbase price target is $398.00, which implies 48.5% upside potential from current levels. Analyst price targets range from a low of $160.00 per share to a high of $600.00 per share.
Coinbase’s Big Advantage
While there are tons of exchanges popping up, few can be trusted as much as the likes of Coinbase, which I believe, sets the industry standard. Coinbase is a proven leader, and as more cryptocurrencies emerge, and as crypto adoption increases with time, it’ll be tough to top the stock.
For now, big believers like Cathie Wood’s ARK Investments have been trimming their stakes, and while the long-term fundamentals still look good, despite the latest dip in price, Coinbase stock remains incredibly expensive at over 10 times sales.
the stock is a fast-falling knife, one that shouldn’t be caught by but the most venturesome of investors. Despite the latest dip, Coinbase stock remains incredibly expensive at over 10 times sales.
Disclosure: At the time of publication, Joey Frenette did not have any positions in any of the securities mentioned in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.