Shares of cryptocurrency exchange Coinbase (COIN) have been back on the retreat as a part of a broader market sell-off still aimed at the tech sector.
While cryptocurrency trading can fluctuate wildly, I think Coinbase should be viewed as more of just the owner of a trading platform. The company has a chance to really make a splash across a wide range of other blockchain technologies with its many satisfied customers.
Undoubtedly, more investors and merchants are opening up to cryptocurrencies. The real opportunity at hand is not a potential unforeseen pick-up in crypto trading but in the potential upsell of existing customers across a wide range of other blockchain-related services. Cryptocurrency investors holding Bitcoin are probably more likely to own some NFTs (non-fungible tokens) or be interested in other services that the firm provides.
If Coinbase can leverage its strong network, it’s hard not to like COIN shares as a top proxy for the crypto asset class or a bet on the future of blockchain technologies, including Web3.
Superbowl LVI Shows We Can’t Underestimate Coinbase’s Brand Power
Coinbase’s 2022 Superbowl LVI ad was met with profound success. The rush of users actually caused the company’s website to go down. I think it’s safe to say that the company got more bang from its buck from the advertisement that propelled app downloads by a whopping 279%.
The advertisement’s success is a testament to the sheer amount of enthusiasm that’s still out there, even as speculative tech stocks plunge. Coinbase can maintain its above-average transaction fees despite the growing number of rivals, thanks to its reputation and brand power. After all, it is tough to know who to trust in the crypto world these days.
On that front, Coinbase has a wider moat than most would expect. With pricing power and plenty of parallel markets to move into, including NFTs, I remain bullish on COIN stock.
The company is not merely an alternative way to play cryptocurrency prices over the near-to-medium term. It’s also an intriguing hedge for investors who lack exposure to the crypto asset class. Further, the company is firing on all cylinders, with plans to hire 2,000 employees in 2022.
A Worthy Hedge for Those Seeking Crypto Exposure
For those who don’t think cryptocurrencies are a bubble that could crash over 90% and stay depressed for a prolonged period, I do think COIN stock looks like a worthy pick-up here.
Indeed, Coinbase has emerged as a glimmer of trust in a somewhat suspect world of cryptocurrencies. Still, this will not prevent COIN stock from imploding if the crypto market crashes. Given how difficult it is to gauge Bitcoin’s next move, Coinbase could have considerable downside potential if interest in crypto assets were to dry up overnight.
Coinbase Stock: A Fine Line Between Value and Trap
Indeed, there’s a lot of speculation going on in the crypto world. Bitcoin has held its own far better than I’d expect, given broader stock market volatility. Whether the crypto market is next to crash next is anyone’s guess. It’s this one worry that leads me to believe that Coinbase may not be as cheap as its stock price suggests.
With shares trading at 14.2 times trailing earnings, I’m inclined to believe COIN stock is more of a low-cost hedge than a value trap. However, investors should realize the extent of the downside, given Coinbase stock’s correlation with Bitcoin and its like.
Wall Street’s Take
Turning to Wall Street, COIN stock comes in as a Moderate Buy. Out of 10 analyst ratings, there are eight Buys, one Hold, and one Sell recommendation.
The average Coinbase price target is $346.56, implying an upside potential of 83.2%. Analyst price targets range from a low of $220.00 per share to a high of $444.00 per share.
The Bottom Line on Coinbase Stock
Coinbase is a trusted brand, and its stock is an intriguing high-risk/high-reward hedge for investors seeking exposure to the crypto markets. If a catastrophic crypto collapse isn’t in the cards, Coinbase looks modestly valued. The firm has strong network effects, with many growth levers to pull as it continues building upon its impressive infrastructure.
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