The phenomenon of cryptocurrencies’ volatile price action is not yet fully understood, but their movement had certainly entered into more of a consolidation period across much of June and July. With a drop in volatility, the companies that generate revenue based on crypto trading are showing their vulnerabilities. Coinbase Global, Inc. (COIN) lives and breathes off crypto volatility, most notably that of Bitcoin (BTC), and at the moment seems to be breathing just a bit less. (See Coinbase stock charts on TipRanks)
Providing his hypothesis on the matter is Dan Dolev of Mizuho Securities, who opined that other analysts have overestimated the actual trading volumes for Q3. If Wall Street consensus estimates are not met, a stock typically sells off once earnings are disclosed for that quarter.
The five-star analyst assigned a Hold rating on the stock, and downgraded his price target to $210 from its previous $225. The new price target represents a potential 12-month downside of -11.24%.
Dolev took into consideration the recent Bitcoin and crypto rally, wherein trading volumes for Coinbase shot up. Unfortunately, these volumes were only temporary, and returned to their more modest levels soon thereafter.
If August and September see similar price action in Bitcoin, it is assertable that Coinbase will fall 20-25% short of Q3 consensus expectations. This metric was deduced by Dolev even after incorporating the recent rally’s trading hike. The upshot is that Bitcoin must experience an uptick in volatility or begin to break above its current resistance level in order for Coinbase to recoup its inadequate July volumes.
The situation is not all doom and gloom, as Dolev later expressed. He went on to discuss the possibility of monetization of other revenue streams, such as “subscription & services, crypto asset sales, [and] corporate interest income.” While Coinbase has benefitted handsomely from the volatility in crypto markets, the company must diversify its revenue sources if it is to survive the winter.
On TipRanks, COIN has an analyst rating consensus of Moderate Buy, based on 9 Buy and 3 Hold ratings, and 1 Sell rating. The average Coinbase price target is $351.33, suggesting a possible 12-month upside of 48.50%. COIN closed trading Friday at a price of $236.58 per share.
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