Shares of cryptocurrency exchange Coinbase Global (NASDAQ:) have been under pressure since they began trading on April 14, 2021. it is not over yet.
COIN Weekly Chart.
But this bearish spell goes against the improving growth prospects for the largest cryptocurrency exchange in the US, and the first major cryptocurrency-focused company to go public. With interest from both individual and institutional investors in the peak of the digital coin market, Coinbase is well positioned to capitalize on it.
The latest figures from the San Francisco-based company further support our view that COIN stocks have a strong growth path and that it is a good buy in times of weakness. In the , released last month, Coinbase's total trading volume grew nearly 38% sequentially, even after falling from its all-time high.
Institutional trading volume increased by 47%, while retail trading volume increased by 21%. Retail investors pay higher fees than institutional traders and accounted for nearly 95% of Coinbase's transaction revenue in the quarter. During the period, Coinbase added more assets for trading than in all of 2020. It now supports 83 assets for trading and 142 for custody.
During this investment wave, Coinbase's profitability soared. The company reported net income of $1.6 billion, more than double the consensus forecast of $683.3 million that analysts had forecast. Revenue for the quarter was up $2 billion, also better than consensus estimates.
Cash Build-Up
This impressive financial profile makes Coinbase one of the few technology companies that have been profitable from their first day of trading.
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 to prepare for a stricter regulatory regime, potential cyber-attacks or potential trade declines.
Despite this strengthening financial position, investors should not downplay the risks associated with investing in crypto assets. The Securities and Exchange Commission is investigating Coinbase over a lending program the company plans to launch and has said it will sue the company over the offering, the Wall Street Journal reported earlier this week.
Coinbase co-founder and Chief Executive Brian Armstrong disclosed the dispute in a series of tweets on Tuesday. He called the SEC's actions "outline" and referred to "closed-door harassment tactics," and said other crypto firms may offer such programs.
Yet many analysts on Wall Street see COIN as a solid investment, especially for investors looking to add crypto exposure to their portfolio and dislike the extreme volatility of digital coins. Oppenheimer, who has an "outperform" rating on the stock with a price target of $444, said in a recent note that the company will play a critical role in developing the crypto ecosystem.
The note read:
“Longer term, whether we are in crypto winter or summer, we prefer 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. "
Starting point
Coinbase has a solid appeal for investors looking to have cryptocurrency exposure in their portfolio. The stock closed at $258.20 on Wednesday. The current weakness of COIN stocks, in our view, provides a good entry point for such investors.
