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Coinbase Can Climb, but also Correlated with Volatility

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When cryptocurrencies do well, it isn’t just those trading them who make money. Several companies move in tandem with, or are indirectly correlated with, the price action of Bitcoin and others, but one in particular can turn revenues if the coin’s price both rises or falls. Coinbase Global, Inc. (COIN) generates the majority of its revenues off of crypto trading volumes, and in Q2 saw more than its fair share of both revenue and trading volume. (See Coinbase stock charts on TipRanks)

Putting this scenario into perspective is Moshe Katri of Wedbush Securities, who wrote that on paper, Coinbase had a phenomenal quarter. It beat Wall Street consensus estimates on revenue, adjusted EBITDA, and EBITDA margin. However, as crypto took a dive late in Q2, so did Coinbase’s volumes.

Katri reiterated a Buy rating on the stock, and raised his price target from $275 to $300. This raised target now suggests a possible 12-month upside of 3.03%.

The five-star analyst expects Coinbase’s total trading volume to decline, going forward into Q3. This is understandable, as the firm recorded a 1,550% rise year-over-year in trading volume and a 1,023% increase in transaction revenue over that same period.

On the bright side, Katri added that “the decline in crypto assets values on the platform seem to be a function of a quarterly fall in crypto prices, rather than, declining usage from institutional volumes.”

Even with a slowdown in July crypto volatility, Coinbase still has some unaccounted-for tricks up its sleeve. The company retains several opportunities for monetization, which are expected to continue propelling long-term earnings power. Furthermore, impacts from the relatively high fees charged for each trade, for user retention and engagement, seem to be offset by the platform’s “breadth of products and services.”

Unfortunately for Coinbase, regulatory uncertainty is expected to continue to cause strong fluctuations in its stock price. Throughout Q2, regulators from both the U.S. and China made high profile announcements regarding cryptocurrencies, at times causing devastating consequences for Bitcoin and its ilk. According to Katri, this volatility will continue to persist.

On TipRanks, COIN has an analyst rating consensus of Moderate Buy, based on 11 Buy and 2 Hold ratings, and 1 Sell rating. The average Coinbase Global price target is $377.82, reflecting a potential 12-month upside of 29.3%. As of 10:29 a.m. EST on Wednesday, COIN was trading at a price of $269.16 per share.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.