The crypto sphere has a term for negative speculative news which creates havoc in the markets. FUD – fear, uncertainty, and doubt. There was much of it around this week, which reached its apex on Wednesday, as the prices of all cryptocurrencies bled profusely, putting a temporary end to the surging bull market.
The decline was set off initially by an Elon Musk tweet saying Tesla will no longer accept Bitcoin as a form of payment, which led to online spats with the Bitcoin community, during which Musk even hinted Tesla might sell all its recently purchased BTC. There’s no proper crypto FUD without a Chinese contribution, which duly arrived in the form of a reiteration of its ban on Chinese financial institutions and payment companies trading and conducting in all manner of business activities involving virtual currency.
Oppenheimer’s Owen Lau also thinks the drop was further exacerbated by margin calls and deleveraging.
“Some offshore crypto exchanges allow up to 125x leverage,” the analyst said. “Therefore, a massive sell-off can easily create a snowball effect and add more downward pressure on BTC.”
All of this negative sentiment has done it in for Coinbase (COIN) stock. The company’s May 17 announcement to issue $1.25 billion of convertible notes didn’t help matters either. The shares were under pressure anyway since the crypto exchange’s splashy public entrance barely more than a month ago. Over the past month, the stock has shed 31% of its value.
All of which means Coinbase shares are a bargain right now, at least according to Lau.
“Our analysis shows that at current valuation, COIN has not only priced in a substantial fee cut but also crypto winter has arrived. We continue to see a sharp dislocation between COIN’s fundamentals and its share price,” the analyst opined.
Coinbase has been displaying some massive growth and the company’s guidance and Lau’s tracker continue to “indicate that the trading volume of Q2 is likely to meet or exceed that of Q1.” Following Q1’s revenue growth of 845%, revenue is expected to increase by 847% year-over-year in Q2.
Wednesday’s volatility is “likely to drive even faster growth,” the analyst commented, “But the stock continues to trend down.”
To this end, Lau reiterated an Outperform (i.e. Buy) rating on COIN stock, backed by a $434 price target. The implication for investors? Upside of 91%. (To watch Lau’s track record, click here)
The rest of the Street also appears to think the shares are undervalued. Going by the $404.75 average price target, there’s 12-month gains of ~78% on the horizon. Overall, the stock has a Moderate Buy consensus rating, based on 8 Buys vs. 4 Holds. (See COIN stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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