logologologologo
  • Home
  • Business
  • Markets
  • Exchange
  • Investment
  • Personal Finance

Coinbase Global Stock: Bull vs. Bear

Coinbase, one of the largest cryptocurrency exchanges in the world, took investors on a wild ride after its direct listing last April. It went public with a reference price of $250, hit its all-time high of $429.54 on the first trading day, and eventually closed at $328.28 per share.

Today, Coinbase trades in the mid-$230s. The market’s initial enthusiasm fizzled out as Bitcoin‘s gains stalled, other speculative cryptocurrencies lost their momentum, and a growing number of regulatory threats cast dark clouds over the nascent industry.

But have investors become too bearish on this high-growth cryptocurrency stock? Let’s compare the bear and bull cases to find out.

What the bears will tell you about Coinbase

The bears dislike Coinbase for three main reasons: its unpredictable growth, the regulatory threats, and the competitive challenges.

Coinbase’s growth rates are certainly stunning. Its revenue surged 144% to $1.28 billion in 2020, then soared 671% year over year to $5.34 billion in the first nine months of 2021. It generated a net profit of $322 million in 2020, and that figure jumped to $2.78 billion in the first nine months of 2021.

However, Coinbase generates nearly all of its revenue from cryptocurrency trades, and its growth is pegged to the market’s fickle interest in Bitcoin, Ethereum , Dogecoin, and other major cryptocurrencies. Over the past three months, the market’s appetite for those cryptocurrencies significantly waned as rising inflation and interest rates caused investors to dump more speculative investments.

That sell-off countered the notion that Bitcoin and other cryptocurrencies were effective hedges against inflation. It also caused Coinbase’s trading volume and monthly transacting users (MTUs) to decline sequentially in the third quarter. Coinbase said crypto market conditions “improved meaningfully” in the fourth quarter, but we won’t know if it actually stopped that bleeding until it posts its fourth-quarter earnings report in early February.

That slowdown makes it difficult to put much faith into analysts’ forecasts for Coinbase. At the moment, they expect its revenue to rise 467% in 2021 and decline 2% against tough comparisons in 2022, but those estimates could be rendered obsolete by a sudden spike or plunge in crypto prices.

Meanwhile, regulators are tightening the screws on the crypto market. Last September, the Securities and Exchange Commission (SEC) forced Coinbase to cancel Lend, a planned feature that would have enabled its users to lend out their USD Coins (a stablecoin tethered to the U.S. dollar) for interest. The SEC is also widely expected to roll out new regulations for cryptocurrencies, crypto exchanges, and crypto mining companies in the near future.

Those tighter regulations could reduce cryptocurrency prices, cripple some of Coinbase’s features, or force it to increase its operating expenses. To make matters worse, a growing number of competitors — including Block‘s Cash App and Robinhood Markets — could lure away more cryptocurrency traders as the market stagnates or shrinks.

What the bulls will tell you about Coinbase

The bulls generally like Coinbase for three reasons: the long-term growth potential of the cryptocurrency market, the expansion of its ecosystem beyond retail cryptocurrency trades, and its surprisingly low valuations.

For example, ARK Invest’s Cathie Wood — who holds Coinbase as a top investment in three of her flagship ETFs — believes Bitcoin’s price will surge from about $40,000 today to over $560,000 by 2026. If that actually happens, Coinbase could generate multibagger gains over the next few years.

Coinbase is also gradually diversifying its business with subscriptions (for commission-free trades, prioritized customer support, and account protection for up to $1 million), new blockchain-based reward programs, an upcoming NTF marketplace, and other decentralizes finance products. That expansion could diversify its revenue streams and lock in more users.

Coinbase’s stock currently trades at 29 times forward earnings and less than seven times next year’s sales. Those valuations are low relative to its growth, but they also reflect the market’s trepidation about its future. But if you’re bullish on the long-term growth of the cryptocurrency, blockchain, NFT, and DeFi markets, it might be the ideal time to invest in Coinbase.

Which argument makes more sense?

Coinbase will likely keep growing, but I believe there are better crypto investment options out there for aggressive and conservative investors.

Aggressive investors might be better off buying cryptocurrencies directly, which could generate bigger gains without the burden of Coinbase’s operating expenses. More conservative investors should simply stick with better diversified companies like Block, which has plenty of exposure to Bitcoin but isn’t an all-in play on the cryptocurrency market like Coinbase.

The market will likely continue to categorize Coinbase as a riskier growth stock this year — and that label could hurt its growth as interest rates gradually rise.

Related posts

May 26, 2022

Nvidia says video gaming market slowing; shares drop 7%


Read more

Categories

  • Business
  • Content
  • Exchange
  • Inflation
  • Investment
  • Markets
  • Personal Finance
  • Technology
  • Uncategorized

Archives

  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021

Recent Posts

  • Nvidia says video gaming market slowing; shares drop 7%
  • Frozen food category surges amid inflation: ‘It’s a dramatic shift,’ says food exec
  • What Didi’s ‘train wreck’ delisting means for US-listed Chinese companies
  • Snap shows ad market’s nightmare ‘becoming a reality’: Morning Brief
  • Dow Jones Futures Fall, Tech Futures Sell Off As Snap Crashes 30% On Q2 Warning

About Us

The Alpha Cut a Vida Street LLC Company
1404 N. Ronald Reagan Blvd.
Suite 1120
Longwood, FL 32750

Link

(843) 256-4375
https://thealphacut.com

Why Us

Terms & Privacy
Policy & Procedure
Disclaimer

This material is not an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed, and is to be used for informational purposes only.
Any performance results discussed herein represent past performance, not a guarantee of future performance, and are not indicative of any specific investment. Due to the timing of information presented, investment performance may be adjusted after the publication of this report. There can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this communication will be profitable, equal any corresponding indicated historical performance levels or be suitable for your portfolio.
All data in this communication is provided for informational purposes only and is not intended for trading or investing purposes. We expressly disclaim the accuracy, adequacy, or completeness of any data and content provided by financial exchanges, individual issuers, their respective affiliates and business partners and shall not be liable for any errors, omissions or other defects in, delays or interruptions in such data, or for any actions taken in reliance thereon. You agree not to copy, modify, reformat, download, store, reproduce, reprocess, transmit or redistribute any data or information found herein or use any such data or information in a commercial enterprise without obtaining our prior written consent.
We make no express or implied warranties or representations and shall have no liability whatsoever with respect to any data contained herein. The data may not be further redistributed or used to create indices or other financial products. This report and the views expressed herein are subject to change at any time based upon market or other conditions (such as domestic and global economic trends) and are current as of the date of publication hereof. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.
We emphasize that Investment in the securities of smaller companies can involve greater risk than is generally associated with investment in larger, more established companies, and can result in significant capital losses that may have a detrimental effect on the value of your investments.
Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.
Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.
Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth.As with any structuring of a portfolio of investments, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.
The information, analysis and opinions expressed herein are for general, impersonal information only and are not intended to provide specific advice or recommendations for any individual entity.

copyright © Alpha Cut 2021. All Right Reserved
The Alpha Cut a Vida Street LLC Company