Coinbase Global (NASDAQ:COIN) made waves on Wallstreet last month after the completion of its initial public offering. The company operates a cryptocurrency exchange platform which allows investors to buy, sell and store cryptocurrencies. Coinbase boasts over 56 Million users and generated $1.14 Billion in revenue as of 2020, a 136% YOY improvement from 2019. Coinbase is the largest US crypto exchange and investors are excited that this listing will see more Bluechip crypto exchanges list publicly in the near future. Let’s breakdown everything investors need to know about Coinbase’s stock forecast for 2021 and beyond.
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What are analysts forecasting for Coinbase stock in 2022?
13 Wallstreet analysts have initiated their 12 month price targets (forecasts) for Coinbase stock. The average 12 month price target is sitting at $393 a share which represents a 74% upside from the current trading price. The general consensus amongst analysts is Strongly bullish with all 9 analysts listing a Buy rating and 4 listing a Hold/Neutral rating.
- The Goldman Sachs Group 5/24/2021 – Analyst Will Nance initiated coverage with a Buy rating and a 12 month price target of $306 a share. The analyst noted to investors that Coinbase was the best way to gain exposure to the cryptocurrency ecosystem.
- Rosenblatt Securities 5/20/2021 – Analyst Sean Horgan lowered the firms 12 month price target to $400 a share with a maintained Buy rating.
- Oppenheimer 5/17/2021 – The firm initiated coverage with a price target of $434 a share and a Outperform rating.
- Mizuho 5/10/2021 – Analyst Dan Dolev boosted the firms 12 month price target to $315 a share with a neutral/hold rating.
- Sanford C. Bernstein 5/3/2021 – Analyst Harshita Rawat set COIN’s 12 month price target to $250 a share, which represents a slight upside. This target is currently Wallstreet’s lowest target on Coinbase stock.
What this means for investors?
Firstly, across the board we can recognise the positive sentiment portrayed by analysts on Coinbase stock. With the average price target averaging 74% above the current trading price, we can conclude analysts can see midterm upside potential in the stock. However, as we move further into 2021 we will likely see larger institutions such as Goldman Sachs cover the stock. Larger institutions tend to have a greater impact on the stock price. Therefore, it may be too early to tell the generalised consensus amongst Wallstreet analysts.
Revenue forecasts for Coinbase in 2021 and beyond
Firstly, the revenue forecasts from analysts is a useful tool for investors in understanding the growth outlook of a company. As mentioned earlier, Coinbase has experienced immense revenue growth over the past 5 years. According to analysts this is only expected to continue in 2021. The average revenue forecast expects Coinbase to generate $6.28 Billion in 2021. This represents revenue growth of 350% from its 2020 annual performance. However, revenue growth is expected to decline in 2022 with average forecasts estimating revenue of $5.56 Billion.
What are the catalysts for this revenue growth?
The major catalyst for Coinbase’s strong revenue forecasts is the growing sentiment for the crypto economy. The surge in investor interest sees Coinbase as the beneficiary, especially considering their dominance within the industry. In addition, the company currently holds an estimated 11% of all cryptocurrency on their platform. Furthermore, the scale of which Coinbase operate has organically positioned their business to attract new users to the platform as the entire addressable market grows with it.
Risks associated with Coinbase stock
The company noted in their Q1 earnings release, that the fluctuations/volatility in the crypto markets does have a subsequent effect on their revenue performance. This is because the demand for crypto will fluctuate based upon the current performance. Therefore impacting their brokerage fees and subscription revenue. Hence, it is important for investors to understand this as it may impact the revenue performance and forecasts over time.
“MTUs, Trading Volume, and therefore transaction revenue currently fluctuate, potentially materially, with Bitcoin price and crypto asset volatility. This revenue unpredictability, in turn, impacts our profitability on a quarter-to-quarter basis”.Coinbase First Quarter 2021 Statement, see here.
In summary, the foreseeable outlook over the next 12 months looks positive for Coinbase based off analysts price targets and the revenue forecasts. In addition, the vastly growing addressable market is an exciting factor for long term Coinbase shareholders. However, as we have noted the dynamic industry of the crypto-economy does pose its own unique risks. For example, a fluctuation or a crypto price cycle will impact the companies revenue returns and forecasts. Therefore, investors should always take this expected volatility into account when analysing the outlook of this stock.
Written by Tyger Fitzpatrick
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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