Will Coinbase hit US$520.80 a share?
Cryptocurrency exchange Coinbase made a high-profile market debut last week, garnering positive outlooks from research teams.
- Coinbase Global Inc (Nasdaq: COIN) share price falls to US$333 per share
- The stock had touched a high of US$429.54 on its first day of trading
- Analysts’ average 12-month target price was US$520.80
- Buy and sell today's most popular stocks with an IG account
Coinbase shares slip after volatile debut
The biggest US cryptocurrency exchange, Coinbase Global, went public via a direct listing last Wednesday (14 April 2021). It marked the largest listing ever by a cryptocurrency company.
Coinbase opened at US$381, up 52.4% from a reference price of US$250. In the first few minutes of trading, the shares leapt to a peak of US$429.54, and were briefly valued at around US$112 billion. They closed Wednesday at US$328.28 apiece.
The stock continued to seesaw on Thursday. It ended last week on a robust note; by Friday, Coinbase was valued at US$68 billion, more than the owner of the New York Stock Exchange.
On Monday (19 April 2021), the counter dropped 2.6% to close at US$333.
Why are analysts optimistic about Coinbase?
San Francisco-based Coinbase boasts 56 million users worldwide and 11.3% of the cryptocurrency asset market share, Reuters said.
All analysts covering COIN shares are taking a positive view, with five recommending ‘buy’. On average, they’re penciling in a 56% climb over the next year to US$520.80, based on Monday’s close, Bloomberg data showed.
BTIG initiated ‘buy’ with a US$500 target price, highlighting that the company was ‘solidly profitable’ in 2020 and 1Q21.
The ‘gold standard among digital-asset exchanges’, Coinbase is poised for sustained rapid growth as the crypto ecosystem expands, with tailwinds from increased institutional adoption, BTIG analysts Mark Palmer and Andrew Harte wrote.
‘We view COIN’s status as a safe harbour among crypto exchanges - it has never been hacked and has rigorously adhered to regulatory compliance - as a key differentiating factor,’ they said.
Bloomberg Intelligence (BI) analysts believe Coinbase ‘sets the tone’ for the crypto ecosystem as an investment, legitimising the rise of Bitcoin and offering a potentially less-volatile way to invest in digital currencies.
BI added: ‘Newer competitors such as Square, PayPal and Robinhood may pressure pricing, but we believe Coinbase’s scale, technology and compliance back its early-mover advantage.’
What risks does Coinbase face?
Larry Cermak, research director at crypto website The Block, said that after COIN shares stabilise, ‘the correlation to Bitcoin will be very high’.
When the price of the world’s biggest digital token falls, it is ‘inevitable’ that the exchange’s revenue and inherently its stock price will decline as well, Cermak added.
BTIG analysts likewise noted that Coinbase’s dependence on transaction fees to generate revenues has created the potential for volatility in its share price as the crypto markets fluctuate.
However, it has been diversifying its platform and driving subscription revenue, thus BTIG believes Coinbase will continue to do so both organically and via mergers and acquisitions.
There are also potential regulatory risks as Coinbase increases the number of digital assets that users can trade on its platform, Reuters reported.
Trade stocks, indices, forex and more with IG today
Create an IG account or log in to your existing account to get started now.
This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.
Explore the markets with our free course
Learn how shares work – and discover the wide range of markets you can trade on – with IG Academy's free ’introducing the financial markets’ course.
Put learning into action
Try out what you’ve learned in this shares strategy article risk-free in your demo account.
Ready to trade shares?
Put the lessons in this article to use in a live account – upgrading is quick and easy.
- Trade over 16,000 popular global stocks
- Protect your capital with risk management tools
- React to breaking news with out-of-hours trading on 70 key US stocks
Inspired to trade?
Put your new knowledge into practice. Log in to your account now.
Live prices on most popular markets