The rising interest in cryptocurrency among investors has been fueled by soaring cryptocurrency prices and an increase in crypto assets available for trading. According to a Facts and Factors market research report, it is estimated that the cryptocurrency market could be worth $5.2 billion by 2026, growing at a compounded annual growth rate (CAGR) of 30% between 2019 and 2026.
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Moreover, the growth of cryptocurrency exchanges that support this trading like Coinbase Global (COIN) and Robinhood Markets (HOOD) augurs well for investors. COIN has seen its stock price soar 22.6% in the past month backed by strong Q3 results.
However, as Coinbase stated in its letter to shareholders, its “business is volatile.” This volatility weighed in on its Q3 results, too, as total trading volumes declined 29% quarter-over-quarter as compared to global crypto spot trading volumes that fell 37% in the same period, driven by “low volatility and declining crypto asset prices.”
This volatility also drove the revenue miss. While revenues soared to $1.3 billion versus $287 million in the same period a year back, this figure still missed the consensus estimate of $1.56 billion. (See Analysts’ Top Stocks on TipRanks)
Revenue miss notwithstanding, Needham analyst John Todaro remained encouraged by COIN’s positive Q4 outlook “with the October rebound in crypto asset prices and volatility driving platform volumes higher for the month.”
The analyst was upbeat about the stock with a Buy rating and a price target of $420 (22.2% upside) on the stock.
While Monthly Transacting Users (MTU) fell 16% quarter-over-quarter to 7.4 million in Q3, the company is also observing an increasing number of users “deepening their engagement with our product portfolio.”
This growing user engagement has led to blockchain rewards revenue jumping 109% quarter-over-quarter to $81.5 million in Q3, which was largely driven by staking. The company defines staking revenue as comprising “the majority of Blockchain rewards revenue and is recognized on a gross basis.”
Todaro believes that the “continued expansion in staking as a key growth area for COIN” and believes that the company’s expansion of its product offerings, particularly Non-Fungible Tokens (NFTs), present “an attractive revenue opportunity.”
The rest of the Street sides with Todaro and has a Strong Buy consensus rating based on 13 Buys, two Holds, and one Sell. The average Coinbase Global price target of $393.50 implies 14.3% upside potential to current levels.
Disclosure: At the time of publication, Shrilekha Pethe did not have a position in any of the securities mentioned in this article.
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