Coinbase Stock Expected to Soar: Analyst Projects $420 Target
Recently, the price of Bitcoin made headlines by briefly topping $100,000, which has sparked increased trading activity among retail investors. This surge in trading can be attributed to rising Bitcoin volatility and a boom in altcoins. According to John Todaro, an equity analyst at Needham & Co., these factors lead to an optimistic outlook for Coinbase's stock price.
In a report issued on Monday, Todaro raised the price target for Coinbase shares from $375 to $420 while keeping a 'buy' rating. Notably, he highlighted that December's trading volumes are shaping up to be the best in the company's history. Previously, Coinbase reported a total trading volume of $183 billion for the third quarter, representing an 18% decline from the previous quarter. This decrease was mainly due to a sluggish Bitcoin market and particularly tough economic conditions during the summer months.
For the fourth quarter, Todaro has significantly revised his trading volume estimate for Coinbase, increasing it from $243 billion to a staggering $435 billion. This adjustment implies a remarkable 137% rise in total trading volume over just three months.
Coinbase’s trading dynamics are reflected in the relationship between Bitcoin's market capitalization and the overall crypto market value. Known as Bitcoin's dominance, this ratio dropped from 59% last month to 51%, according to data from CoinGecko. If this trend continues, Todaro warns it could decline as low as 45%. He cautioned that such a pattern often signals a euphoric market phase which could precede a significant downturn.
The Rise of Altcoins
The approval of spot Bitcoin ETFs earlier this year has made it easy for investors to gain exposure to Bitcoin via straightforward brokerage transactions. While similar products are available for Ethereum, Todaro emphasizes that altcoin trading is crucial for Coinbase's distinct positioning within the market. He indicated that leading altcoin activity will be essential for the growth of Coinbase's transaction volumes heading into 2025.
Recently, Coinbase has been actively expanding its offerings, focusing on trending meme coins among its digital assets. They plan to list several new currencies, including Gigachad (GIGA), Turbo (TURBO), Mog Coin (MOG), and Moo Deng (MOODENG), adding to a growing catalog that already features 267 different digital assets.
Historically, Coinbase enjoyed its highest trading volume of $462 billion back in May 2021, generating transaction revenue of $1.9 billion during that quarter. Despite efforts to diversify its revenue streams, transaction fees remain Coinbase's primary source of income. For Q3, the company reported $572 million in transaction revenue, contrasted with $556 million from subscriptions and services.
As the company’s CFO, Alesia Haas, mentioned, trading activities tend to correlate closely with market volatility. The volatility of crypto assets notably decreased in Q3 as compared to Q2, leading to a corresponding reduction in trading volumes.
How has Bitcoin's volatility been? The Bitcoin Volatility Index, which tracks fluctuations in Bitcoin's price over the previous 30 days, peaked at 2.44% in November, significantly lower than this year’s high of 3.25% in August.
This year, Coinbase’s stock price has nearly doubled, closing at $310.52 recently. Since the period following Donald Trump’s election, Coinbase shares have surged 60% from a low of $194, reflecting optimism for a more cryptocurrency-friendly administration.
Additionally, Oppenheimer analyst Owen Lau raised his price target for Coinbase stocks from $265 to $358, citing rising trading volumes and expected regulatory clarity under the newly elected administration. Lau anticipates Coinbase's trading volume will reach $350 billion in Q4, predicting sustained momentum due to favorable political conditions.
With heightened sentiment around cryptocurrencies driven by recent political changes, Coinbase appears well-positioned to capitalize on the renewed interest from retail investors.
Coinbase, Bitcoin, Stocks