Coinbase Stock - Is It Truly Undervalued

Last Updated on 4 months by newseditor

In the midst of the crypto industry’s worst bear market ever, Coinbase stock has dropped to new lows, dividing analysts along ideological lines. When it comes to cryptocurrency exchanges, Coinbase is a global powerhouse. Brian Armstrong launched the company in 2012, and by April 2021, shares were being traded on the Nasdaq. Coinbase shares began trading at $250, with a valuation of $86 billion, at the peak of stock market valuations. 

Matt Hougan, chief investment officer at Bitwise Invest, said that despite the stock price decreasing drastically in 2022, he still considers Coinbase to be undervalued. Hougan claims that Coinbase was worth $8 billion at the end of 2018. There were 22 million subscribers, $520 million in revenue, and $11 billion in assets at the time. Forward to 2022, the site has earned $3.3 billion, attracted 101 million members, and accumulated $101 billion in assets. Nonetheless, these promising signs of growth are at odds with the $9 billion valuation at which the company is currently trading. 

Coinbase Stock Is At An All-Time Low

Since the new year began, Coinbase stock has declined and is currently trading at roughly $35. For the year so far, this statistic has dropped by more than 86%. As a result of the decline in share price, the market capitalization of the exchange fell to about $8 billion. Analysts have ascribed its stock slide to several factors, including the current crypto winter and the fact that the exchange has been losing money at an all-time high rate. Throughout the initial three quarters of 2022, the exchange had a reduction of almost $2 billion. 

Coinbase’s primary source of revenue is transaction fees, which the current industry has affected. Due to the decline in the value of crypto assets, transaction costs have decreased despite the vastly increased number of consumers. Competitors such as Binance.US have also attempted to woo traders with new choices like as free transaction costs for Bitcoin and other assets (BTC). CEO Brian Armstrong told Bloomberg that he expects the exchange’s revenue to fall by as much as 50 percent this year.

Several analysts have downgraded the stock’s rating. Recently, Mizuho downgraded the stock to underperform and set a price target of $30. Lazar Wolf stated that he was a series C investor in the exchange and sold all his stocks at $340 a year ago. 

Meanwhile, despite some analysts’ pessimism, many others share Hougan’s perspective. Hany Rashwan, the CEO of 21.co, believes that Coinbase shares are undervalued. According to him, Coinbase’s stake of the fiat exchange market has doubled since September, despite the company’s significant losses this year. Rashwan stated that anyone who believes in cryptocurrency’s long-term potential and values Coinbase’s recent growth rates and market share would view the past year or two of terrible market conditions as an anomaly. He added that, although they may be losing money, he sees a good business underneath.

Takeaways

Coinbase CEO Brian Armstrong says the company will be there for the next two decades and that investors should buy COIN shares just like they buy cryptocurrencies.

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