Cryptocurrency exchange leader Coinbase (COIN) has been on a bit of a rollercoaster ride lately. It plunged on Wednesday after Bitcoin prices did likewise. However, some positive word from analysts provided a base for the stock.
Coinbase, much like cryptocurrency itself, has always been volatile. However, it’s hard not to be bullish on this company. It is, after all, on the cusp of a whole new revolution in payments technology. It may even prove to be the ultimate source of all cryptocurrencies in the future.
The last year in COIN stock’s price action is mostly categorized by peaks and valleys. One peak kicked off the year and held briefly until slipping throughout the latter half of April into May. It recovered in early May, but the recovery did not last long.
In one week, the company slipped from around $303 to nearly $225. That was when the valley kicked in. The company held to the $225 to $250 range for the rest of July.
Then, the company started a new leg up in August, which brought the company over $275 before slipping back under $250. September brought the company back over $275, but also saw it slide under $250, making a serious play to breach the $225 floor.
That was the start of the second peak. Within six weeks, the company broke the $350 price level before sliding back down to around $230, where it sits today.
While the huge loss in Bitcoin prices hurt Coinbase, a subsequent new evaluation from Bank of America gave Coinbase a little bit of support. Bank of America hiked Coinbase from “neutral” to Buy, though it left the price target untouched at $340.
Just the Beginning of the Cryptocurrency Gold Rush
It’s easy to forget that Coinbase has only been publicly traded for less than a year now. It celebrates its one-year anniversary in April. The company has seen explosive gains and equally traumatic losses in that time, so looking for continued volatility in this stock is likely a good play.
It’s going to be up almost as big as it will be down, and sometimes, within a matter of weeks. For those investing in Coinbase, be prepared to HODL (Hang On for Dear Life) just as hard as you might to cryptocurrency itself.
A look at why Bank of America made its upgrade will spell out excellent reasons to believe in Coinbase going forward. Perhaps the biggest of these is that Coinbase is starting to be more than just a place to buy and sell cryptocurrency.
Bank of America’s note on Coinbase points to “revenue diversification,” noting that subscription and services revenue is set to reach 16% of total revenue in 2023.
In 2021’s third quarter, it was just 12%. That may be a modest increase, but it’s an increase nonetheless. That suggests that Coinbase is branching out into more crypto-related services, making it less susceptible to the wild price swings of cryptocurrency on the company’s stock. Coinbase is also visibly pursuing lateral market moves, including adding NFTs (non-fungible tokens) as well as decentralized finance products.
There are risks, of course. Regulators are eyeing cryptocurrency with increasing skepticism. That raises the potential for new rules that will choke the life out of the system. That seems to be the case worldwide to one degree or another; right now, cryptocurrency is outright banned in China, as well as in eight other countries.
Wall Street’s Take
Turning to Wall Street, Coinbase has a Strong Buy consensus rating. That’s based on 13 Buys, one Holds, and one Sell assigned in the past three months. The average Coinbase price target of $402.33 implies 74.4% upside potential.
Analyst price targets range from a low of $160 per share to a high of $600 per share.
Concluding Views
There are problems with Coinbase. The stock has a pretty hefty price tag to get in. It’s also a whipping boy for regulators who may decide to shut the whole party down at any time.
Yet, there is also a lot of potential here. With cryptocurrency really getting started, Coinbase is an early leader. It’s facilitating the trade of crypto miners’ produce, and that’s no mean feat.
Coinbase’s expansion projects should only help the company assert its value going forward. There’s a lot of reason to buy in on Coinbase. Being part of a move that could be the wave of the future certainly makes it worth a closer look.
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Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
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