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Coinbase: Breaking Down Oppenheimer’s New Bullish Call
Coinbase’s (COIN) IPO reference price was $250, yet the stock was already worth $381 when it began trading on the stock market a month ago. Since then, the stock has been through a 30% pullback, before bouncing again. Such volatility is hardly noteworthy in the realm in which the crypto exchange operates, although shareholders now have a first-hand taste of what Coinbase users go through on a regular basis. The current share price, however, is to be looked upon as an opportunity, according to Oppenheimer analyst Owen Lau. Lau initiated coverage of Coinbase with a Buy rating and $434 price target. Investors could be pocketing gains of 50%, should Lau’s thesis play out as expected. (To watch Lau’s track record, click here) “Given the recent volatility of crypto prices, increasing institutional (i.e., trading and treasury management) acceptance of crypto and higher demand for retail crypto products,” Lau said. “We believe the earnings upside potential is significant, and in our view, current valuation provides an attractive entry point.” It has taken Wall Street some time to come around to the advantages presented by cryptocurrencies, partly due to the risks they pose to the traditional financial system. But this is part of the appeal to Lau, who says the Coinbase recommendation “heavily rests on our long-term positive view toward the disruptive nature of crypto, particularly on cross-border money transfers, payments infrastructure and tokenization.” And Coinbase being the largest crypto exchange is an “enabler” of crypto innovation and stands to benefit from digital assets’ mass adoption. Lau says the company can leverage its trading arm to solve several “pain points” in the current financial system and at the same time “monetize the success.” What are these pain points, then? “1) inflationary pressure on local currency and non-credible central bank in some countries; 2) underbanked and underserved people don’t have access to existing banking system for money transfers or cross-border transactions; 3) there are fees charged for these transactions and it takes some time for cross-border transactions to be processed.” Adding to Coinbase’ appeal is the size of the opportunity at hand. Crypto is no longer a niche market but a massive one growing at a frightening pace. The market cap of crypto assets increased from ~$11 billion at the end of 2013 to ~$126 billion in 2018 and is now around the ~$2.2 trillion mark. That said, Lau admits investing in Coinbase might not be for the faint of heart. It is after all a crypto exchange and part of an industry famous not only for its incredible run ups but also for its pants dropping swoons. “Therefore,” Lau sums up, “We believe COIN is well suited for long-term-oriented investors who could tolerate near-term volatility.” Looking at the consensus breakdown, most, but not all, agree. The stock has a Moderate Buy consensus rating, based on 6 Buys and 3 Holds. At $435.33, the average price target is almost identical to Lau’s. (See Coinbase stock analysis on TipRanks) Coinbase stock forecast To find good ideas for crypto stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. 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.
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