Why Bitcoin’s Drop is Good News for Coinbase’s Stock

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The recent drop in Bitcoin may have caused an increase in trading volume for Coinbase. Getty Images

Bitcoin’s year-end slide took Coinbase with it. The pessimism could be misplaced, says an analyst.

Bitcoin fell 31% from its November 8 high until the end of 2021, and that drop hurt Coinbase, which fell 29% during the same period. The fear is that as Bitcoin and other cryptocurrencies fall, investors lose interest, thus hurting crypto trading.

These concerns are misplaced according to Oppenheimer analyst Owen Lau. While the decline in Bitcoin has been painful, it has not driven investors away from cryptocurrencies. Instead, the decline prompted investors to trade more. Lau estimates that trading volume hit a record $ 540 billion in the fourth quarter, 10% above his previous estimate of $ 489 billion and 17% above the Wall Street consensus. As a result, it raised its sales forecast for the fourth quarter to $ 2.1 billion from $ 1.9 billion. Lau also notes that Coinbase is now trading at just 7.3 times sales estimates in 2022, well below 19.8 for “comparable high-growth fintech stocks.”

No wonder, then, that Lau is predicting good things for Coinbase’s stock going forward. “We believe in the fundamentals of COIN, whose trading volume at the end of 2021 is expected to reach an all-time high,” he writes. The Street seems to underestimate the earnings power of COIN, and we’re seeing a 13% increase from consensus on revenue. We find COIN to be attractively valued and believe the dislocation presents an attractive entry point for investors. “

Lau has an outperformance rating on Coinbase, with a price target of $ 444. The stock gained 0.4% to $ 253.49 on Monday morning. Bitcoin fell 0.1% to $ 46,981.

Write to Ben Levisohn at [email protected]

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