Shares of Coinbase Global Inc (NASDAQ: COIN), the crypto exchange with a market cap of around $64 billion, have had a roller-coaster year. For those of us who have been following the crypto space and its related stocks for some time, this is perhaps not all that surprising. After all, you’d be hard-pressed to find a more volatile security over the past couple of years than Bitcoin.
Coinbase started the year strong, though after peaking in March, its stock sank 45% from July through September. But with a notable post-election rally kicking off, including a 30% jump in yesterday’s session alone, the stock is already up 70% from its low.
For investors who are interested in crypto and stocks like Coinbase, there’s a lot of news and opinions to digest right now. Let’s jump in and see why there are at least 2 reasons to like Coinbase and one reason to avoid them.
Fundamental Factors
To start with, let’s take a look at Coinbase’s recent earnings report, which came out last week before the election. At first glance, it wasn’t a great report. The company missed analyst expectations for both revenue and earnings due to what they said were lower crypto prices, which impacted trading volumes and commissions. Still, Coinbase’s revenue did grow an impressive 80% year-over-year, while its earnings per share doubled from the prior quarter.
These were promising trends, and helped fuel immediate post-election speculation that Coinbase could be in for a serious rally. Bitcoin’s recent rally above $75,000, including a 10% jump from the election, bodes well for Coinbase’s trading revenues as investors flock back to digital assets. One of the reasons for this is that a Trump administration is considered to be more crypto-friendly in many ways, not least of all around regulation.
While the earnings miss was disappointing, the changing political landscape points to a potential recovery into, and through, 2025. This is one key reason to like the look of Coinbase right now.
Analyst Updates
Another reason is the bullish outlook by some of the analysts. In the aftermath of last week’s report, the teams at Canaccord Genuity, HC Wainwright and Needham & Company all reiterated their Buy ratings on the stock. HC Wainwright’s price target of $295 in particular should be quite tempting to investors, given it’s still pointing to a targeted upside of around 15% even with Wednesday’s pop.
There are contrasting views to take note of here though. Both Barclays and Bank of America rated the stock Neutral last week, and urged caution due to the earnings miss. However, given how much the fundamental landscape has changed, you have to be wondering if these ratings will soon be revised upwards.
Potential Concerns
Going a step further than the Neutral ratings, and giving us at least one reason to avoid Coinbase right now, was Mizuho’s Underperform rating on the stock last week. While the team there still boosted their price target up to $178, that’s still calling for nearly a 30% drop from current levels.
It’s not often that you see such disparity among analysts, especially with a stock that can rally as quickly as Coinbase, but this is perhaps indicative of its inherent volatility. To paraphrase an old saying, when Bitcoin sneezes, Coinbase catches a cold, and there’s no sign of this tight relationship weakening in the months ahead.
Getting Involved
For now though, Bitcoin is rallying and so is Coinbase. Investors are nothing if not forward looking, and the prospect of a lightly regulated crypto-landscape for the next 4 years will more than outweigh almost every concern around last quarter’s underperformance.
As we head into the last couple of weeks of the year, Coinbase appears well-positioned to capitalize on the risk-on sentiment that was initially fuelled by the Fed’s rate cuts and which has been added to by the outcome of the election. While it’s important to note not everyone is a fan of its prospects, there are, for now at least, more reasons to like them than to avoid them.
