Coinbase (NASDAQ:COIN) has been public for approximately three weeks as I write this. While it went out like a house on fire, jumping as high as $429.54 on its first day of trading (April 14), it finished the day up 31.3% at $328.28.
It’s been downhill ever since.
Now trading a couple of dollars under $300, I wonder if Coinbase is a $400 stock or a $200 stock. Here’s my look at both sides of the coin.
Coinbase Is a $400 Stock
If you think about it, Coinbase’s history is a little bit similar to the launch of Nasdaq (NASDAQ:NDAQ) in 1971. Granted, I was only 7 at the time, but I can only imagine the excitement from those working in the industry as stocks began to trade electronically.
Nasdaq sold its shares on a restricted basis as early as 2000, but it didn’t go public on its own exchange until Feb. 9, 2005. By contrast, Coinbase was launched in May 2012 and was public within nine years of its founding.
Clearly, Coinbase had a much faster trip to the IPO circle. Nevertheless, they both operate financial exchanges that help the world function. And they both thrive on innovation.
I might be a relative newbie in cryptocurrencies, but I know a thing or two about the financial services industry. So, I don’t think I’m speaking out of school when I say that Coinbase is the cryptocurrency exchange to trade Bitcoin (CCC:BTC-USD) and all the other cryptocurrencies popping up around the world.
A couple of days before its opening, I said that Coinbase would double in price on its first day. At the April 14 high, it was up 72%, but that’s close as I got. As I wrote in my article, if Coinbase debuted with a $100 billion valuation, it would be trading at “88 times its trailing 12-month (TTM) and 244 times operating income.”
Despite those nosebleed multiples, I went as far as stating that it could be worth as much as $136 billion. No, I wasn’t smoking weed at the time.
Analysts who’ve weighed in on the newly public company have generally been quite positive about Coinbase.
“Coinbase is a foundational piece of the crypto ecosystem and is a barometer for the growing mainstream adoption of Bitcoin and crypto for the coming years in our opinion,” Wedbush analyst Dan Ives wrote in a mid-April note to clients.
But he’s not the only one who’s enthusiastic about the cryptocurrency exchange.
BTIG analyst Mike Palmer has a buy rating and a 12-month target price of $500, thanks largely to the accelerating growth and acceptance of cryptocurrencies. MoffettNathanson analyst Lisa Ellis told MarketWatch that Coinbase is “not for the faint of heart” but gave it a $600 target price before its IPO.
Overall, five analysts rate it a buy, another has it at overweight, and three rate it a hold, with an average target price of $438.22. Based on 205.6 million shares outstanding [pg. 84 of IPO prospectus], it would have a market capitalization of $90.1 billion, a long way from my far-fetched…