Among the hottest tech stocks in 2023, Coinbase (COIN) has surged over 387% year-to-date, valuing the company at $38.72 billion by market cap. Despite these outsized gains - including a 1% pop on today's news of clearance from French crypto regulators - COIN stock is down 55% from all-time highs.
Coinbase is one of the largest cryptocurrency exchanges globally, and its share price is largely tied to the performance of digital assets such as Bitcoin (BTCUSD) and Ethereum (ETHUSD). These two cryptocurrencies account for the majority of trading volumes on Coinbase, and rising crypto prices have pushed COIN higher in recent months, too.
Coinbase stock is a well-known favorite of Cathie Wood, a popular investor on Wall Street - but Wood has been taking profits amid COIN's recent run higher, with her flagship funds unloading shares worth $181 million over the past 30 days. However, at 10.89%, COIN is still the top holding in Wood's ARK Innovation ETF (ARKK) by a comfortable margin.
Let’s see if Coinbase stock can continue to move higher in 2024.
The Bull Case for Coinbase Stock
Coinbase benefits from higher trading volumes during bull runs, allowing it to generate significant revenue from commissions and fees. However, Coinbase is diversifying its revenue base to generate cash flows across market cycles.
Last year, it announced a partnership with the world’s largest asset manager, BlackRock (BLK), where it will offer crypto trading services to institutional investors. Coinbase is also the primary custodian for several institutional investors, including BlackRock, for their upcoming spot Bitcoin ETF (exchange-traded fund). The launch of a spot Bitcoin ETF appears almost inevitable at this point, which should drive institutional adoption of BTC at an accelerated pace - pushing crypto prices higher in the process.
In August 2023, Coinbase launched Base, a proprietary blockchain that should allow it to gain traction in the rapidly expanding asset tokenization market.
According to BlackRock, asset tokenization is among the most exciting trends globally and could be a key revenue growth driver for Coinbase in the upcoming decade. The process of asset tokenization converts traditional assets, such as stocks and bonds, into digital assets that can be traded on a blockchain, such as Base, reducing costs for traders while improving settlement times and ownership transparency.
Coinbase ended 2021 with more than $7 billion in sales. Around 90% of its revenue came from trading fees, but this number was reduced to just 53% as of Q3 of 2023. The company's other revenue streams include staking rewards, custodian fees, and a partnership with the issuer of USDC, one of the most popular stablecoins among crypto players.
This dynamic revenue model, along with a focus on cost-cutting, has enabled Coinbase to navigate a turbulent environment over the last two years.
What's Next for Coinbase Stock?
In addition to the potential Bitcoin ETF, the upcoming BTC halving could act as a tailwind for Coinbase. Historically, Bitcoin prices have surged higher after the halving cycle, where mining rewards are reduced by 50% every four years. The next halving cycle is expected to take place in the first half of 2024, and the event should boost trading volumes for Coinbase.
That said, cryptocurrency players, including Coinbase, are under intense scrutiny by U.S. regulators, which might stifle growth and innovation for these companies until there is further clarity on a range of issues.
What Is the Target Price for COIN Stock?
Analysts tracking Coinbase stock expect the company's adjusted loss per share to widen from $0.46 in 2023 to $0.66 per share in 2024. If Coinbase misses these low expectations, its stock price could move significantly lower in the next 12 months. However, Wall Street is already predicting some downside from the stock's currently lofty levels.
Analysts have an average target price of $92.33 for COIN stock, which is a discount of nearly 44% to today's price. Even the Street-high price target of $160 implies expected downside from current levels.
Out of the 22 analysts tracking COIN, six recommend “strong buy,” one recommends “moderate buy,” eight recommend “hold,” two recommend “moderate sell,” and five recommend “strong sell.”
