Coinbase (NASDAQ:COIN) has been a standout in the 2023 tech stock landscape, witnessing a staggering 387% surge year-to-date and securing a market cap of $38.72 billion. Despite this remarkable performance, COIN stock has experienced a 55% dip from its all-time highs, even though it enjoyed a 1% boost following the recent clearance from French crypto regulators.
As one of the globe’s largest cryptocurrency exchanges, Coinbase’s stock value is closely tied to the fluctuations of major digital assets like Bitcoin (BTCUSD) and Ethereum (ETHUSD), which dominate the platform’s trading volumes. The recent bullish momentum in the crypto market has contributed to COIN’s upward trajectory, despite a notable sell-off by prominent investor Cathie Wood, who divested shares totaling $181 million over the last 30 days. Nevertheless, COIN remains the top holding in Wood’s ARK Innovation ETF (ARKK) at 10.89%.
Looking ahead to 2024, the question arises: Can Coinbase stock continue its upward trajectory?
The Bullish Outlook for Coinbase Stock
Coinbase thrives on increased trading volumes during bullish market phases, capitalizing on substantial revenue from commissions and fees. The company, however, is strategically diversifying its revenue streams to ensure cash flows across market cycles.
In a significant move, Coinbase entered a partnership with BlackRock (BLK), the world’s largest asset manager, to provide crypto trading services to institutional investors. Serving as the primary custodian for various institutional players, including BlackRock, in anticipation of their forthcoming spot Bitcoin ETF, Coinbase positions itself for potential accelerated institutional adoption of BTC.
In August 2023, Coinbase introduced Base, its proprietary blockchain designed to tap into the burgeoning asset tokenization market. Asset tokenization involves converting traditional assets like stocks and bonds into digital assets traded on a blockchain, offering cost reduction for traders and enhancing settlement times and ownership transparency. BlackRock views asset tokenization as a key driver for Coinbase’s revenue growth in the coming decade.
Although Coinbase concluded 2021 with sales surpassing $7 billion, its revenue mix has evolved, with trading fees accounting for only 53% as of Q3 2023, down from 90% previously. Additional revenue streams include staking rewards, custodian fees, and a partnership with the issuer of USDC, a popular stablecoin in the crypto sphere.
This diversified revenue model, coupled with a focus on cost-cutting, has enabled Coinbase to navigate the challenges of the past two years successfully.
What Lies Ahead for Coinbase Stock?
In addition to the potential boost from a Bitcoin ETF, the upcoming BTC halving in the first half of 2024 could act as a positive catalyst for Coinbase. Historically, Bitcoin prices have experienced upward surges post-halving cycles, where mining rewards decrease by 50% every four years. This event is anticipated to drive increased trading volumes for Coinbase.
However, the crypto industry, including Coinbase, is currently under heightened scrutiny from U.S. regulators, introducing uncertainties that could impede growth and innovation until regulatory clarity is achieved.
COIN Stock Target Price
Analysts foresee an expansion in Coinbase’s adjusted loss per share from $0.46 in 2023 to $0.66 per share in 2024. Falling short of these conservative expectations might lead to a substantial drop in COIN stock prices over the next 12 months. Despite Wall Street already predicting a downside from the current elevated levels, analysts maintain an average target price of $92.33 for COIN stock, reflecting a nearly 44% discount from the present value. Even the most optimistic price target of $160 suggests an anticipated decline from current levels.
Among the 22 analysts covering COIN, opinions are divided, with six recommending a “strong buy,” one suggesting a “moderate buy,” eight advising “hold,” two advocating “moderate sell,” and five recommending a “strong sell.”
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