Bitcoin and the cryptocurrency space have fallen sharply in recent weeks, but according to Oppenheimer analyst Owen Lau, those moves shouldn’t hurt Coinbase stock, and the exchange’s public listing doesn’t deserve to be swept under the bus.
Coinbase should not be associated with BTC’s drops
Coinbase made its public debut on the Nasdaq in mid-April. At first it all started well. The exchange’s shares started at more than $ 300 each, while Bitcoin eventually hit a new all-time high of around $ 64,000 per unit. However, a few weeks later things started to get really sour and a little over a month after debuting, Bitcoin was trading for almost half of its previous value.
Coinbase was also hit, with stocks falling into the low $ 200 range. Apparently, people’s interest in the crypto trading platform only lasted about five minutes. According to Lau, Coinbase shouldn’t get caught up in the crypto winter that is prevailing at the time of writing. He determines:
We believe that Coinbase should not trade in lockstep with Bitcoin as Bitcoin can be very volatile, but at the same time it drives higher trading volume due to its volatility. It’s similar with all traditional exchanges, and we think it’s still a misconception in the market that people think that Coinbase should be trading alongside Bitcoin in the future.
For the most part, Lau believes things will go very smoothly for Coinbase, and he sees the stock climb as high as $ 440 within the next year. He bases his ideas on several elements, including Coinbase with higher revenues for the second quarter of 2021, which could force Wall Street to raise its standards for exchanges.
He also commented that fears surrounding Coinbase’s recent fee cut are “exaggerated” and will eventually fade in people’s minds. Lau continued his testimony and said:
Looking ahead, we believe management will continue to strategically increase contributions from 1) recurring revenue (e.g., the Coinbase Earn campaign, staking, and M&A) and 2) altcoins. Coinbase said that in the first quarter ~ 40 percent of its trading volume came from altcoins, which is significantly lower than its competitors (e.g. ~ 85 percent of Voyager’s spread earnings). After adding Dogecoin, Polkadot, and others, Coinbase should gradually reduce its reliance on Bitcoin. We continue to see a large shift between Coinbase’s fundamentals and its valuation and believe that current price provides an attractive entry point for long-term investors.
A huge profit boom
Coinbase’s revenue has skyrocketed over the past three months, according to CFO Alesia Haas. In a recent interview, Haas stated:
Crypto is volatile and we have to keep in mind that this is a really young industry and a very emerging asset class. So even though we’ve seen a lot of volatility, we’ve looked at it from the start and the momentum we’re seeing continues.