Conventional wisdom tells us that the decline of bitcoin’s price affects the whole crypto ecosystem, in turn driving down trading activity, including on leading exchange Coinbase (COIN).
However, following BTC’s most recent drop – from ~$68,000 on November 8 to $48,000 on December 31 – Oppenheimer’s Owen Lau has something to say about that perceived notion, as the increased volatility appears to have resulted in “substantial trading volume and revenue” for Coinbase in Q4.
The quarter’s trading volume came in at a record $540 billion, a 10% increase on Lau’s prior estimate of $489 billion and 17% above the Street’s forecast. The figure is also 17% higher than the previous record of $462 billion set in 2Q21 and amounts to a ~65% sequential increase. Compared to the same period last year, trading activity increased by ~507%.
On account of the strong trading volume, Lau raised his 4Q revenue forecast from $1.9 billion to $2.1 billion – 13% higher than the consensus estimate. There’s also a 10% increase to the EPS forecast, which rises to $2.12, 17% above the Street’s call.
“We consider it noteworthy for a 9-year-old company to generate such a high margin and cash flow, when similarly young, high-growth companies struggle to generate profit,” the analyst opined.
Although it appears unlikely right now, there’s also the possibility of the dreaded “crypto winter.” While Lau thinks a prolonged bear market could “chase out sub-par platforms,” put a dampener on valuations, and affect near-term sentiment, the analyst sees several reasons why long-term investors need not be overly concerned: “1) COIN can be one of the few survivors ($6.4B cash on hand), 2) COIN could consolidate and come out stronger, and 3) investors can buy COIN at a discount.”
In fact, the analyst believes shares are already “attractively valued,” and thinks investors should make use of an “attractive entry point.”
Accordingly, Lau rates COIN an Outperform (i.e. Buy) along with a $444 price target. Investors stand to pocket ~75% gain should the analyst’s thesis play out.
Coinbase has plenty of support on Wall Street right now. Barring one Hold and Sell, each, all 13 other reviews are positive, culminating in a Strong Buy consensus rating. The $406.33 average target is set to generate returns of 61% over one-year timeframe. (See Coinbase stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
