Stocks of Coinbase Global (NASDAQ:) have been in a downtrend for much longer than the broader index. Since its peak in November last year, the stock has lost 47% of its market value.
But after this sharp correction, COIN's valuation has become more reasonable, giving investors the opportunity to gain exposure to the largest cryptocurrency exchange in the US and the first major cryptocurrency-focused company to go public .
In line with the broad market recovery, San Francisco-based COIN gained more than 8% in the past five days after hitting its lowest level since its April IPO. The stock closed at $180.96 on Thursday.
Coinbase Global Weekly Chart
Despite recent crypto market volatility, Goldman Sachs told customers to buy shares of Coinbase to gain exposure to a publicly traded proxy for crypto. In a note, the investment bank said:
“We continue to believe that COIN is the best way to gain exposure to the ongoing evolution of the crypto ecosystem and believe that further progress in new revenue initiatives could lead stocks to outperform the &# 39;beta' of crypto prices.”
All Things Crypto
In a note last week, Piper Sandler cited Coinbase as one of his top ideas, saying it sees an attractive entry point for the growing cryptocurrency and digital asset space. The mainstream adoption of digital assets remains strong, and Coinbase is likely to be the "on ramp" for all things crypto, the note said.
These sentiments are also reflected in a poll by Investing.com in which the majority of forecasters recommend the stock. Their consensus price target implies about 98% upside potential for the next 12 months.
Coinbase Global Consensus Estimates
Source: Investing.com
With this bullish outlook, however, we must emphasize that COIN is not a stock that is suitable for investors with a short-term horizon due to the highly volatile nature of the crypto market.
As crypto assets take a dip in the current market route, COIN will undoubtedly face the impact on its trading volumes. , the largest cryptocurrency, fell to $33,000 in January, from a record nearly $69,000 less than three months ago. Other digital assets have also suffered, with a token of about 30% since the end of December.
To cope with the uncertainties associated with the crypto market, Coinbase has built up a cash supply of $4 billion. The company is conducting a stress test on its balance sheet to ensure it has sufficient resources on hand to prepare for a stricter regulatory regime, potential cyber-attacks or potential trade declines.
Oppenheimer said in a recent note that the company would play a critical role in developing the crypto ecosystem:
“Longer term, whether we are in crypto winter or summer, we favor the crypto adoption trend and the disruptive nature of digital assets. For us, Coinbase is an enabler of crypto innovation and will have a strong voice in the direction of digital asset development. "
Bottom Line
Coinbase has a solid appeal for investors seeking cryptocurrency exposure in their portfolios. In our view, the current weakness of COIN stocks provides a good entry point for such investors.
