Coinbase Stocks Rise Amidst Bitcoin ETF Success and JPMorgan's Rating Upgrade
Summary:
On February 15, Coinbase's stocks rose by 6% within the first trading hour, due to increased token prices and a rating upgrade by JPMorgan. Bitcoin ETFs exceeded expectations by accumulating over $10 billion in their first month of trading. Despite a predicted negative income margin of -55.53% for this year, some analysts forecast a net income of $103 million. Coinbase faces legal issues with regulators following a lawsuit by the U.S. Securities and Exchange Commission, but investors remain optimistic about the long-term potential.
Coinbase (COIN) shares rose 6% within the first trading hour on Feb. 15, driven by an uptick in token valuations and an upward rating revision by JPMorgan analysts. Kenneth Worthington, one of JPMorgan's experts who previously downgraded the crypto-swap firm stocks in January, has now shifted his perspective and altered the stock rating from underweight to average due to the likely favorable influence of Bitcoin ETFs on crypto markets. He reportedly stated on Feb. 15 that high cryptocurrency prices are not only stabilizing but escalating, which will enhance the activity and earning capacity at Coinbase throughout 1Q24, given the fast-paced flow into Bitcoin ETFs and the substantial appreciation in the cost of Bitcoin and Ethereum.
Large sums of over $10 billion flooded into Bitcoin ETFs in the first trading month, surpassing almost all preliminary predictions, highlighting the strong demand for crypto investment options. Coinbase's custody section has collaborated predominantly with asset managers who began Bitcoin ETFs in January, with these ventures envisaged to generate revenues in the range of $25 to $30 million.
However, InvestingPro suggested that there might be cause for concern as Coinbase may face losses this year, with the firm's negative operating income margin standing at -55.53%. This performance index pinpoints a company's profitability after handling its variable expenses. Several analysts who spoke to Bloomberg anticipate the firm to report losses of roughly $16 million in the final quarter of 2023. Nonetheless, certain analysts, like Needham & Company's John Todaro, expect Coinbase to declare a net income of about $103 million, potentially elevating the firm to profitability for the first time in a couple of years.
Furthermore, Coinbase is embroiled in legal altercations with regulators. The U.S. Securities and Exchange Commission sued the firm in June 2023 for purportedly vending unregistered securities. Despite these setbacks, investors remain sanguine about the firm's long-term future. Over the year, the total return on the stock price has grown by 131%. It's also worth noting, according to InvestingPro, that COIN presently trades at a "high Price/Book multiple", implying that the stock might be overpriced relative to the company’s tangible net assets. Notwithstanding the stock trading above the $170 mark, JPMorgan's Worthington sustained the stock target price at $80.
Published At
2/15/2024 7:23:03 PM
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