Coinbase (COIN-USD) has become the leading U.S. exchange by trading volume. Over the past 12 months, COIN stock has rebounded by an astonishing 175%. The bullish outlook for 2024 relies on Bitcoin (BTC-USD) surpassing previous highs, with other leading tokens following. Rising crypto prices drive trading volumes, the main source of Coinbase’s revenue and earnings.
Certainly, if we see an alt coin rally materialize this year, COIN stock could be an out-performer. That said, given the stock’s year-to-date decline, investors are right to show caution. Here’s more on where Coinbase could be headed in 2024.
COIN in 2023
In Q3, Coinbase exceeded expectations with sales reaching $674 million, driven by a surge in subscription and services revenue. The net loss significantly narrowed to $2.3 million. Expanding internationally, Coinbase entered Canada and registered as a cryptocurrency exchange with the Bank of Spain, expanding its market reach.
However, the company’s future remains tied to the unpredictable cryptocurrency market, making it a volatile stock.
Morningstar analysts predict a $5.8 trillion market cap for the cryptocurrency market by 2032, anticipating Coinbase’s revenue to grow at a double-digit pace. Although the current valuation at 14.5 times sales is higher than the historical average, investors might consider taking a stake given the growth potential.
Still Leading in the U.S
As the leading U.S. cryptocurrency exchange, Coinbase facilitates trading, staking, and storage of crypto assets for retail and institutional investors. Revenue comes from transaction fees and interest on USDC reserves, linked to trading volume and interest rates.
With a focus on security and compliance, Coinbase has gained investor trust and pricing power. Reporting solid results, Q3 revenue rose 14% to $674 million, driven by a surge in subscription and services revenue, primarily from interest on USDC reserves.
The company also narrowed its net loss to $2 million, emphasizing effective expense management.
Be Cautious With Potential Revenue Boost
Coinbase faces SEC concerns with its stablecoin, and ARK Invest sold about $27.6 million in Coinbase stock. Expectations of a significant revenue boost from an upcoming spot Bitcoin ETF might not materialize as assumed.
Mizuho Securities analyst Dan Dolev warns investors about the potential minimal revenue impact of Bitcoin ETFs on COIN. Dolev calculates Coinbase’s potential upside as single-digit percentages. Dolev maintains an “underperform” rating on COIN stock with a $54 price target.
So Should You Buy?
Coinbase, rooted in blockchain, has faced challenges amid crypto volatility. The stock has continued to surge and plunge alongside the market, seeing a significant year-to-date decline, after having a solid 2023.
I don’t have a crystal ball and can’t predict what 2024 will bring. This is a stock that I can understand the bull thesis on, but one I would remain cautious with for the medium-term.
Over the long-term, it is possible Coinbase could win out as the “rails” of the crypto sector. That’s just not a bet I’m willing to make right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.