Coin base (CURRENCY) was in the news this week, in a big way, and not in a good way. As CNBC reported, users of the cryptocurrency trading platform have been complaining for months about “a pattern of account takeovers, where users suddenly see funds disappear from their accounts, followed by poor customer service from the company.”
Coinbase customers interviewed for the story told stories of opening accounts with the service and found that amounts ranging from $12,000 to $35,000 to $168,000 had suddenly disappeared from their accounts, in a matter of minutes, by unknown parties. – only to be informed by email by Coinbase that the hacks were “[not] Coinbase’s fault,” and “as a result, Coinbase cannot reimburse you for your alleged losses.” And anyway, says Coinbase, “less than 0.01%… of our customers have been affected by account takeovers.”
Well, that’s a relief… except for the 0.01%.
Despite the bad press, shares of Coinbase rose 1.3% in trading on Tuesday, for which investors in the company can probably thank Needham & Co. analyst John Todaro. a report of his own in which he initiated coverage of Coinbase stocks with a “buy” rating and a price target of $420, suggesting there is a whopping 63% upside potential in Coinbase stock.
In addition to already being a “market-leading crypto-asset exchange”, Todaro, with more than 68 million users across more than 100 countries, controlling $223 billion in assets, says Coinbase has “significant future opportunities” to further develop its business. to grow beyond just exchange services, including by offering services in “strike, custody, revenue-bearing products and more”.
As the analyst explains, Coinbase is already “a go-to crypto exchange” for both private and institutional users, and “an easily accessible platform” to attract users to the “crypto ecosystem”. This company is only expected to grow its revenue by 467% in 2021, and then a more modest 9% in 2022. However, further growth will come from supporting users who want to “bet” crypto (i.e. actively participate in validation transactions and proving cryptocurrency stakes), and in particular Ethereum – a company that grew 271% sequentially in the second quarter.
The analyst also applauds the fact that Coinbase is “offering new assets and new products…maintaining uptime, providing deep liquidity pools” to facilitate crypto trading, “and ensuring the reliability of the exchange”.
That’s a curious claim, admittedly, in light of the CNBC story. But Todaro states that there has been no successful hack of Coinbase’s own exchange yet – in stark contrast to what you might assume from users’ complaints about their accounts being hijacked).
Well and good, you say, but how profitable is Coinbase – profit is what normally returns the return of an equity investment? And it’s interesting to ask because… it turns out Coinbase might be getting less profitable, not more.
Between the fabulous rise in Bitcoin prices so far this year and the deluge of revenue this has brought Coinbase, Todaro estimates Coinbase will earn a hefty $13.15 per share this year. Next year, however, even with a modest increase in revenues, the analyst predicts a 24% drop in earnings per share to just $10.04.
How long that trend will last and whether it will derail Todaro’s buying thesis remains to be seen.
In general, COIN stocks receive a Moderate Buy rating from the analyst consensus on Wall Street. The stock has 15 recent ratings spread across 11 buys, 3 holdings and 1 selling. The average price target here is $355.54, which represents an increase of ~38% from the current level. (See COIN stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are those of the featured analyst only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.