After losing over 75% in market value during the bear market of 2022, Bitcoin (BTCUSDC) has sprung back to life over the last 22 months. Since the start of 2023, BTC prices have surged over 300%, valuing the world’s largest cryptocurrency at a market cap of $1.34 trillion. In addition to purchasing Bitcoin, investors can gain access to the digital asset by holding shares of crypto-related companies, such as Coinbase (COIN) and MicroStrategy (MSTR). While Coinbase is one of the world’s largest crypto exchanges, MicroStrategy is the largest institutional holder of Bitcoin.
Let’s see which of these Bitcoin stocks is a better buy right now.
Is MicroStrategy Stock a Good Buy?
Valued at a market cap of $41.8 billion, MicroStrategy (MSTR) shares have returned an emphatic 1,434% in the last five years. MicroStrategy began accumulating Bitcoin on its balance sheet in mid-2020, and now holds 252,220 BTC.
While MicroStrategy is an enterprise software company, its aggressive Bitcoin strategy means its stock performance is now tied to the performance of the digital asset.
MicroStrategy Executive Chairman Michael Saylor expects BTC prices to surge to $13 million by 2045. At these prices, its current Bitcoin position would be valued at $3.3 trillion. This suggests that MicroStrategy could have the largest cash reserve compared to any other publicly traded company, allowing it to fund innovative projects or allocate capital towards big-ticket acquisitions.
Recently, investment bank Bernstein raised its target price on MSTR stock to $290, indicating an upside potential of over 23% from current levels. Bernstein is bullish on MicroStrategy’s significant BTC investment, worth roughly $16 billion today.
At an event hosted by Bernstein, Saylor explained that MicroStrategy eventually aims to evolve into a Bitcoin bank and create capital market instruments tied to the cryptocurrency. He explained, “We are in the core business of creating Bitcoin capital market instruments across equity, convertibles, fixed income, and preferred shares.”
Each of the eight analysts covering MSTR stock has a "strong buy” recommendation. Wall Street has an average target price of $223.44 for the tech stock, which is a slight discount to Friday's closing price.
Is Coinbase Stock Undervalued In October 2024?
Valued at $51.36 billion by market cap, Coinbase (COIN) has returned close to 164% in the last 12 months and is up almost 500% since the start of 2023. While Coinbase is among the world’s largest crypto exchanges, it is diversifying its revenue base, which should result in lower volatility related to crypto's price swings.
Previously, Coinbase generated the majority of sales from crypto trading fees and commissions. So, the company would benefit from higher trading volumes and fees during bull runs and experience a drastic fall in sales when sentiment turned bearish. For instance, its sales rose from $1.27 billion in 2020 to $7.87 billion in 2021, before falling to $3.15 billion in 2022.
In addition to facilitating cryptocurrency transactions, Coinbase now generates revenue from other products and services, such as staking, interest income, and custodial services. This diversification allows Coinbase to benefit from several aspects of this disruptive market, making it a top investment choice in 2024.
Today, Coinbase generates 56% of its revenue from transaction fees, down from 90% in 2022. In Q2 of 2024, Coinbase reported transaction revenue of $781 million, up from $327 million, while total subscription and services revenue rose to $599 million, up from $335.4 million.
Moreover, its asset-light business allowed Coinbase to generate a free cash flow of $1.20 billion in the last 12 months, up from $923 million in 2023.
Priced at 35.6 times forward earnings, COIN stock is not too expensive, especially if Bitcoin prices can touch multiple record highs in the next 12 months.
Out of the 22 analysts covering Coinbase, seven recommend “strong buy,” one recommends “moderate buy,” 13 recommend “hold,” and one recommends “strong sell.” The average target price for COIN stock is $241.70, about 18% above Friday's close.
If you are bullish on Bitcoin, it makes sense to gain a small position in both these crypto stocks and benefit from outsized gains over time.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
