Coinbase Stock Price Forecast March 2022 – Time to Buy COIN Stock?

While Coinbase (COIN) stock has come off its 2022 lows, it is still down over 26% for the year and is underperforming the markets by a wide margin. The stock trades at less than half of its 52-week highs that it hit last year and is also well below the direct listing reference price.

What’s the forecast for COIN stock and is it a good buy at these prices?

Coinbase stock recent development: Jim Chanos revealed a short position

Famed short-seller Jim Chanos has revealed that he is short on COIN stock. Calling Coinbase a “bubble stock,” Chanos said, “There are plenty of companies that are in the new economy that have real growth, real cash flows and real earnings, but there’s a lot that are just being sold on stories, and we would argue that Coinbase is one that’s being sold on a story.”

Chanos rose to fame with his short position against Enron in 2000. Over the last few years, he has been in the news for his short bets against Tesla. While Chanos made a killing on his Enron short position, he, like many other Tesla bears, lost money shorting Tesla stock. Chanos admitted that the Tesla trade was “painful” but he believes that the Elon Musk run company is overvalued.

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Chanos expects COIN stock to fall

Chanos believes that Coinbase is “overearning” as compared to other exchanges. He said, “We think that as competition increases in crypto … as competition increases amongst the exchanges, you’re going to see fee compression, and as it is, Coinbase will probably not be profitable this year.”

Coinbase fourth-quarter earnings

Coinbase reported revenues of $2.49 billion in the fourth quarter of 2021. To put that in perspective, it reported net revenues of $1.23 billion in the third quarter and $497 million in the fourth quarter of 2020. The company’s sales were way ahead of the $1.94 billion that analysts were expecting.

Its net income also more than doubled over the third quarter to $840 million. Coinbase reported an adjusted EPS of $3.32 which was again way above the $1.85 that analysts were expecting.

Coinbase reported stellar operating results in the quarter. It had 11.4 million MTUs (monthly transacting users) in the quarter while the total traded volume was $547 million in the quarter. In 2021, its total traded volume jumped to $1.67 trillion which was way above the $193 billion that it reported in 2020. The company had $278 billion worth of assets on the platform at the end of 2021, as compared to $255 billion at the end of the third quarter. The company’s performance in 2021 was better than what it had guided for.

COIN’s 2022 guidance spooked investors

Coinbase said that it expects its retail trading volumes and retail MTUs to fall on a sequential basis in the first quarter. It blamed the fall in crypto prices and volatility in the quarter for the expected decline in volumes.

For the full year, 2022, Coinbase provided very wide guidance. It expects the annual average retail MTUs to be between 5-15 million. Commenting on the wide range, it said, “This wider than normal set of factors results in a wider range of potential outcomes for 2022. Simply put, we have less near-term visibility, and it is currently too early to provide a more precise range.”

While the company expects the growth in services and subscription revenues to be higher than 2021, it is forecasting a fall in ATRPU (average transaction revenue per user.) Coinbase reported an ATRPU of $64 in 2021 as compared to $45 in 2020 and $34 in 2019. In 2022, COIN expects ATPRU to be pre-2021 levels which would mean a big fall from what it reported in 2021.

The management commentary on the 2022 outlook spooked investors and the stock fell despite the otherwise strong earnings report.

Analysts have lowered COIN’s target price

Analysts have been gradually lowering COIN’s target price. Earlier this month, Goldman Sachs lowered the stock’s target price from $288 to $250 while maintaining its buy rating. After Coinbase released its Q4 earnings, Oppenheimer, Needham, Piper Sandler, Compass Point, and Canaccord Genuity were among the brokerages that lowered their target price.

Coinbase stock forecast

Wall Street analysts have a consensus buy rating on COIN stock. Of the 25 analysts polled by CNN Business, 19 rate the stock as a buy while five rate it as a hold. One analyst has a sell rating in COIN stock.

Its median target price of $298 implies an upside of almost 60% over current prices. Its lowest target price is $200 which is a premium of 7.6% while the highest target price of $600 is a premium of 222% over current prices.

Last week, Atlantic Equities reiterated Coinbase stock as overweight. It said, “While Coinbase Global significantly exceeded our expectations in 2021, weaker crypto prices and volumes suggest a slower start to 2022. However, in dissecting Coinbase’s performance in 2021 we see strong momentum in its underlying trends that we expect to carry through into this year.”

COIN stock long term forecast

As highlighted by Chanos, the higher fees charged by Coinbase are not sustainable over the long term. There is bound to be more competition even as the trading volumes are also expected to rise on higher crypto adoption. However, higher engagement on the platform and the addition of new digital assets on the platform will help the company offset some of the revenue loss from lower fees.

Also, revenue diversification measures like NFTs would pay off in the long term. Metaverse could be another long-term revenue driver for Coinbase. The addition of new crypto assets is helping COIN and in the fourth quarter, 68% of its trading volumes were from altcoins.

Should you buy COIN stock?

Coinbase stock has been under pressure amid the broader market crash. The sell-off in cryptocurrencies hasn’t helped matters either for COIN stock. The stock trades at an NTM (next-12 months) PE multiple of 36.3x which looks reasonable. If you believe in digital assets and see them as the future, Coinbase is one stock that should find a place in your portfolio.

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