Stock Analysis & Ideas

Coinbase Stock (NASDAQ:COIN): Cathie Wood’s Catching the Falling Knife. Should You?

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Coinbase stock has been a fast-falling knife following the FTX blowup and other factors that could make crypto winter way colder. Despite the fear on the Street, Cathie Wood remains a bull, loading up on shares after the latest dip.

Coinbase (NASDAQ:COIN) can’t seem to catch a break. Undoubtedly, shares of the popular crypto exchange platform have felt shockwaves from FTX’s collapse. Adding more salt to the wounds, Apple (NASDAQ:AAPL) recently blocked the latest release of Coinbase’s wallet due to a violation of policies. Things seem to be going from bad to worse for Coinbase. With innovative and unprofitable growth stocks, once again, amplifying volatility faced by the Nasdaq 100 (NDX), bottom-fishers may be wondering if it’s too soon to dip a line in the waters. Despite the massive negative momentum, famed innovation investor Cathie Wood is not afraid to brave the dip.

At writing, COIN stock is now down about 90% from its all-time high hit in the back half of 2021.

Cathie Wood had exited Coinbase stock in the past but is now back in the game at much lower prices. Wood’s ARK Invest funds reportedly purchased more than 1.3 million shares in November.

That’s a very bold and risky bet by one of the most fearless investors on Wall Street.

Jumping into a stock after a 90% drop isn’t everybody’s cup of tea. Wood’s latest courageous move is hard to ignore for venturesome investors who still believe that crypto has a long-term future.

Despite Wood’s approval, I am neutral on the stock. It’s just too hard to go against the grain ahead of a recession year and an FTX-induced crypto winter.

Coinbase Stock Fluctuates Following FTX Flop

FTX’s downfall has been a major story in the crypto universe of late. Once again, a large number of crypto believers were dealt a major blow to the chin. Though the implosion of FTX may mean more business for Coinbase, the market-wide impact will not be soon forgotten.

Bank of America (NYSE:BAC) recently downgraded COIN stock to “Hold” from “Buy,” citing a number of headwinds that would weigh on the name as the crypto markets deal with the aftermath of FTX’s implosion.

Most notably, Bank of America views rising uncertainty and falling confidence as just two reasons behind its downgrade. Undoubtedly, the FTX fiasco could make for a much colder crypto winter than expected. In that case, all players in the crypto waters could get caught with their pants down as the tide lowers.

With a lot of FTX shock already factored into the crypto markets, now seems like a terrific time to go against the grain with a top exchange like Coinbase. COIN stock now trades at a rock-bottom 1.9 times sales and 1.7 times book value. That’s a compelling bargain too good to pass up for those who view cryptocurrencies as a legitimate asset class.

Now, there’s no telling just how long crypto winter will last. Regardless, folks like Cathie Wood seem to think the risk/reward is favorable, and it’s hard to argue with her with the stock trading at these depths. There’s a lot of panic built into the name here.

Is Coinbase Stock a Buy, According to Analysts?

Turning to Wall Street, COIN stock comes in as a Moderate Buy. Out of 19 analyst ratings, there are nine Buys, seven Holds, and three Sell recommendations. The average Coinbase price target is $74.59, implying upside potential of 74.2%. Analyst price targets range from a low of $41.00 per share to a high of $155.00 per share.

Takeaway: Still the Better Way to Bet on Cryptocurrencies

Coinbase stock is one of the choppiest rides in the market right now. The crypto markets have also swung wildly after FTX’s blowup. With more uncertainty added on top of Coinbase stock (think Apple’s recent blocking of Coinbase Wallet’s latest update), COIN stock is only suitable for those willing to part with a vast majority of their investment.

A stock that’s lost 90% of its value could continue to free-fall. In any case, Cathie Wood’s vote of approval is intriguing. Many Wall Street analysts share her enthusiasm at these depths. With a crypto winter breeze in the air, I can’t say I share the enthusiasm for a name that may not be so quick to rebound.

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