Coinbase Global (COIN) had a stellar IPO debut in April 2021. The crypto market was going up. Everyone was talking about cryptocurrency had finally gone mainstream. Since then, matters have taken a u-turn for this stock. Extreme volatility in the crypto market had cast a significant effect on the stock’s performance. Regardless, we are bullish on the stock.
COIN stock lost about 50% of its value since its IPO opening price in April 2021. Does this mean one should stay away from COIN until matters improve? If you are someone who believes crypto is going to remain an exciting venture for investors in the future, you might want to keep an eye on it. We believe Coinbase is one of the best stocks to get exposure in the growing crypto industry without undertaking high risk.
Coinbase Global, popularly known as Coinbase, is one of the largest cryptocurrency exchange platforms in the United States. The company lists about 50 cryptocurrencies for trading and offers primary financial accounts in the crypto economy to retail users. Its exchange platform has 73 million verified users and trades more than $327 billion in crypto every quarter across more than 100 countries worldwide.
While the cryptocurrency industry is riddled with volatility, the craze for it hasn’t died down. Coinbase provides a safe way to gain exposure in this industry, making it an attractive investment source.
Moreover, as Coinbase mainly earns money by charging a fixed percentage on fund deposits and trades, its investors will not have to depend on the performance of any particular cryptocurrency to earn returns. That means even if the best performing cryptocurrencies in the market suddenly become obsolete, the Coinbase investment of the investors will continue ticking on higher and higher.
Peter Christian of Citigroup had a similar stance on the Coinbase Stock a few months back. Due to COIN being a crypto economy facilitator, he feels that its stock is positioned to make ‘higher highs and higher lows’ as crypto adoption increases because it offers the investors direct exposure to the crypto market.
Besides, he also sees additional opportunities for the stock to benefit as it expands its offerings beyond facilitating transactions into cold wallet storage, prepaid debit cards, and non-fungible tokens.
Integral Part of the Crypto Economy
The crypto industry is growing very fast. Back in 2020, this market was valued at $1.49 billion, and by 2030, it is expected to reach $4.94 billion, thus growing a CAGR of 12.8% between 2021 to 2030. As previously stated, a major chunk of Coinbase’s revenue comes from transaction fees; it can be concluded that the company’s business will also grow similarly depending on the growth of the crypto market.
Coinbase already has a huge user base and is an important ally of the institutional investors looking out for ways to enter into the growing crypto market. This implies that it is in a very good position to reap the benefits of increased transactions in the crypto market as the market grows bigger.
Besides, by introducing Coinbase Cloud, which is a tool that can be used by developers to build applications and services with the help of the Coinbase infrastructure, it has positioned itself to potentially become like Amazon Web Services of the crypto industry in the coming times.
However, it is also true that because cryptocurrencies are susceptible to high volatility, it becomes difficult to predict the company’s future performance.
Improved Financials
The best thing about trading platform operators is that they love volatility and make money through trading fees. Even though the global crypto spot trading volume had declined 37% in the third quarter of 2021, Coinbase was able to successfully outperform the market.
Riding on the volatility of the crypto market, the company had generated $1.2 billion in net revenue in the third quarter of 2021, thereby making it the third consecutive quarter of generation of more than $1 billion in revenues. Apart from that, it was also able to grow its subscription revenue by 41%.
Coinbase is working towards accelerating the pace of enhancement of its asset base as well. The company added 30 new assets for trading and an additional 19 assets for custody in the third quarter of 2021. Thus, by the end of that quarter, it had access to 103 assets for trading and 158 assets for custody in its trading platform.
Wall Street’s Take
Turning to Wall Street, COIN stock comes in as a Strong Buy. 13 out of 15 analysts have given Coinbase a Buy rating while there is also one Buy and one Hold rating.
The average Coinbase Global price target of $411.43 represents 114.9% upside potential.
Hedge Against Volatility
The crypto economy is growing, and most investors want to become a part of it. However, due to its extreme volatility of the market, many investors with lower risk appetites often shy away from becoming a part of it.
COIN works as a hedge against these sudden cryptocurrency fluctuations, thus helping investors ride out the inevitable volatility in the crypto market. It lets the investors enjoy the fruits of the crypto industry without them actually having to purchase the cryptocurrencies, thus limiting their risk exposure to a great extent.
COIN is a broad investment into the budding cryptocurrency economy. That means that as cryptocurrency adoption continues to increase with the passage of time, Coinbase will turn out to be one of the best stocks to gain exposure into that growing sector.
Moreover, as the non-fungible tokens are also gaining popularity these days, Coinbase’s looming NFT marketplace could potentially become another catalyst of its high growth in the coming years.
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