Key points
- Stocks have been on a strong rally for more than a year now, and the outlook remains strong.
- As Bitcoin has returned to growth, stocks like Coinbase are incredibly well positioned to do well.
- However there are some concerns about its current valuation, so manage your risk appropriately.
- 5 Stocks We Like Most Than Coinbase Global
A triple-digit percentage increase in just over a month should tell you all you need to know about how Wall Street is looking Coinbase Inc NASDAQ: MONEY in these days. After enduring the worst that the cryptocurrency winter could have thrown at it, the cryptocurrency exchange has come roaring back with a vengeance.
Since hitting bottom early last year, Coinbase shares have gained more than 700% and have done much to undo the damage from the 90% sell-off they suffered. If you are one of the many investors who have missed the rush to date, you would be forgiven for thinking that most of the move has been missed, and it may be too late to get involved now.
But don’t worry. Several stars are starting to align, supporting Coinbase’s rally in the coming months. Let’s pop in and take a look.
A broader crypto rally
The first is the ongoing bull run seen in the crypto space right now. After being written off by so many in recent years following a dramatic collapse, Bitcoin is currently at its highest level ever against the USD. As Bitcoin performs well, so do all cryptocurrency-related stocks, including Coinbase, more than most others. The recent launch of Bitcoin-linked ETFs has done much to both improve overall investor sentiment towards cryptocurrency investing and normalize it as a long-term available asset.
The previous bull runs seen in Bitcoin and its many peers were too easily dismissed as fringe assets benefiting from cheap money and strong risk appetite among investors. But the fact that cryptocurrencies are back now, stronger than ever, when interest rates are high and potential industry-altering crises, like the FTX explosion, have passed, speaks volumes about its longevity. For stocks like Coinbase, this can only be a positive for their long-term growth prospects.
Coinbase’s burgeoning growth potential was recently discussed by the Goldman Sachs team, which improved its rating on the stock last week. It was a move echoed by the KBW team, who did the same thing last month. Now, it’s worth noting that both teams previously rated Coinbase a bearish sell or equivalent, and both stopped short of upgrading it to a full buy or equivalent, but these were still two major upgrades and both were in the right direction.
Concerns about evaluation
Coinbase remains a highly volatile stock, both in a good way and a bad way. It’s easy to be tempted by the seemingly endless string of gains over the past few months, but remember how quickly things have changed in the past. As the old saying goes, when Bitcoin sneezes, Coinbase catches a cold. And right now, there’s an argument to be made that Coinbase is looking a little frothy. In fact, a Relative Strength Index (RSI) reading of nearly 80 suggests the stock is heavily overbought right now and could be due for an impending pullback.
Even a price-to-earnings (PE) ratio above 700 doesn’t help matters in this regard. However, investors thinking about getting into Coinbase know that they are not buying an established, mature organization, and many would say that’s what makes it so attractive. The risk here is certainly higher than in most other stocks, but so is the potential reward.
If you believe in the ability of cryptocurrencies to continue to become more mainstream and if you are interested in having some sort of non-specific exposure to cryptocurrencies, then Coinbase is undoubtedly an interesting option. Keep an eye on the shares to consolidate their recent gains above $250, but don’t be surprised if there is some volatility in the near future.
Before considering Coinbase Global, you’ll want to hear it.
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