Global Coinbase (NASDAQ: COIN) can’t seem to take a break. It went public in April, just like Bitcoin (CRYPTO: BTC) prices were leveling off. Now that Bitcoin is on the rise, with many of its more speculative crypto counterparts faring even better, Coinbase is on the sidelines of the rally.
Piper sandler analyst Richard Repetto believes the stock is ready to rebound. It calculates an 86% correlation between Coinbase stock and the price of Bitcoin. However, things haven’t turned out that way lately. After a spring swoon, Bitcoin prices rose 28% in the third quarter; Coinbase stock was down 4%.
There are good reasons for the disconnection (and we’ll get to that shortly), but Repetto thinks the sale of Coinbase shares is overdone. It maintains its overweight rating and its price target of $ 335 which suggests a 38% increase from Monday’s close. It might be time for the crypto barometer to start acting like one.
Coinbase not so stable
It has been a wild ride for Coinbase investors through just five months of public trading. The stock initially took off after pricing its direct quote at a benchmark price of $ 250, trading as high as $ 429.54 on its first day in the market. It continued to surrender all of those gains, and as of Monday’s close, it was trading below its benchmark price.
Coinbase initially performed better than the crypto market on days when Bitcoin and other digital currencies fell. This makes sense, because Coinbase is a trading platform; it takes advantage of volatility. But the recent role reversal, with the escalation of Bitcoin and the continuation of Coinbase, also makes sense.
There have been a few speed bumps on the Coinbase Expressway lately. Last month, CNBC ran a report about hackers draining Coinbase accounts, with little recourse for victims. The issue also shed light on the platform’s customer service shortcomings. It is difficult to win as a trading platform if you cannot be trusted.
Last week, it was the Securities and Exchange Commission that sent a notice to the trading platform to block its launch of Coinbase Lend. The program would offer accounts containing the stablecoin issued by Coinbase USD coin (CRYPTO: USDC) a 4% return in exchange for the possibility of lending it to others.
This week, it was the plans to sell bonds for $ 1.5 billion that angered the market on Monday. In short, there are viable reasons why Coinbase has lost a step in the rise of coins traded on its exchange. The company finds itself putting out a few different fires and raising money at an inconvenient time.
You still have to love Coinbase here like a broken IPO. Growth has been explosive in its brief stint in public markets. Its turnover increased 11-fold in its last quarter and its bottom line is growing even faster.
With 68 million verified users on a sticky and scalable platform, Coinbase has established itself as one of the ultimate cryptocurrency stocks of the revolution. Once he stops tripping (and he’s certainly scratched his knees a bit this summer), he’ll be a sprinter worthy of growth stock portfolios.
This article represents the opinion of the writer, who may disagree with the official recommendation position of a premium Motley Fool consulting service. Were motley! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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