Shares of Coinbase Global, Inc. (COIN) have been under pressure alongside most other tech stocks these days. With just a bad day or two away from entering single-digit P/E territory, questions linger as to whether the bears, who view Coinbase stock as a value trap, or the bulls, are right.
Indeed, Coinbase is quite a battleground stock, and the forward-looking nature of its industry does analysts no favors when they attempt to evaluate the financials. Respected short-seller Jim Chanos recently targeted the company for “over earning,” also citing that margin pressures could be up ahead. There’s no denying that.
In the past, I’ve noted that Coinbase fees are above the average and that cryptocurrency brokerages were likely to face eroding margins. With the euphoric trading frenzy now behind us, Coinbase faces some very high year-over-year comparables. With such a depressed valuation multiple, though, I think it’s clear that nobody expects Coinbase to one-up itself once crypto-trading tailwinds face and investors begin to trim the high-risk assets out of their portfolios.
Make no mistake, Coinbase will fluctuate wildly based on the price of Bitcoin and other cryptocurrencies. The bears will tout that the best possible days are in the rear-view. Still, the bulls argue that Coinbase is an innovator that’s far more than just a crypto brokerage in a race to the floor on the commission front.
Coinbase Can Weather the Storm as Earnings Take a Breather
Though I stated that Coinbase was likely to face margin pressure at the hands of rivals, I praised the firm for its brand.
Yes, there are tons of competitors, but how many are as established as Coinbase? I’d argue that it’s far better to pay a bit more to get the comfort of knowing that you’re in good hands with a big-league platform that isn’t going anywhere overnight.
Still, amid fintech disruption, there will be more trusted names (perhaps even a big tech firm) that could break into the space over the next decade. Fortunately, by the time such a rival moves in on cryptocurrency trading, Coinbase may already be focused on the next big thing. As a blockchain infrastructure play, the long-term case for owning Coinbase makes more sense.
ARK Invest’s Cathie Wood, who’s still bullish on COIN stock, seems focused on the more distant future than the near-term future or past.
Yes, there are headwinds up ahead, but the company is making the right investments to lay down the foundation for the future of crypto.
Coinbase NFT is Coming Soon, and It Could Be a Big Deal
NFTs (Non-Fungible Tokens) may or may not be a fad. In any case, the launch of Coinbase’s NFT Marketplace could propel such digital assets again to the forefront.
Though it’s hard to gauge the market size of NFTs, it is an underrated corner of the blockchain market where Coinbase can dominate. Currently, OpenSea is a go-to NFT marketplace where enthusiasts and investors can buy intriguing digital assets with cryptocurrencies like Ethereum.
The real opportunity in NFTs is if Coinbase can leverage its established brand and market its Marketplace to consumers who may have not otherwise considered purchasing the digitally unique entities.
Arguably, NFTs remain in their nascent stages. They could be a fad, or they may be something that could become increasingly popular once we’re propelled into the digital worlds of tomorrow (think ‘metaverse’).
Coinbase Stock: Are the Bulls or Bears Likelier to Come Out on Top?
As Chanos shorts COIN stock, Wood is fine buying the dip. She has conviction in the company’s future, as it looks to skate where the puck is headed next. The stock is down around 55% from its all-time high, just shy of $350 per share. So there may be real value to be claimed in the $34 billion crypto infrastructure company.
With so much damage already done, I’m more inclined to part with Cathie Wood. Although I don’t think Wood’s $1 million Bitcoin price target will be hit over the next decade, Coinbase has the means to become the next big thing in the world of crypto.
Of course, there will be huge ups and downs as crypto fluctuates. However, Coinbase seems focused on where the puck is headed next. With the keys to the potentially lucrative NFT market, there are reasons to give the firm the benefit of the doubt, even as it runs face-first into headwinds.
In short, I think the bears and bulls both have solid cases. In the long run, though, I think it’s the bull case that will shine through.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, COIN stock comes in as a Moderate Buy. Out of 16 analyst ratings, there are 12 Buy recommendations, two Hold recommendations, and two Sell recommendations.
The average Coinbase price target is $296.53, implying an upside of 101.32%. Analyst price targets range from a low of $135 per share to a high of $500.
The Bottom Line on Coinbase Stock
For Coinbase, the range of possibilities is extreme. Coinbase is a great innovator in the crypto scene, and it’s arguably a better bet than Bitcoin itself.
On the flip side, earnings seem poised for a breather as comparables become tougher to trounce. Further, a cyclical downturn or further boom in crypto markets remains a wildcard that could send COIN stock flying in either direction.
For now, I’m siding with the bullish Cathie Wood. Though her track record has been less than stellar of late, she raises good points about the firm’s focus on the next frontier in the crypto and blockchain space. That alone, I think, warrants a higher multiple; even Coinbase faces an earnings “hangover” after a magnificent year that will be tough to top.
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