In the long run, the market is like a weighing machine, as Benjamin Graham and Warren Buffett have said. Coinbase (NASDAQ: COIN) certainly has worth as a marketplace for well-liked cryptocurrencies like Bitcoin (BTC-USD). Nevertheless, because Coinbase is presently valued too highly, the market’s weighing machine is anticipated to drive its stock price down. Coinbase’s shares temporarily increased as a result of the market’s short-term voting mechanism. That happened to some extent because of the buzz surrounding the recently approved spot Bitcoin exchange-traded funds. It’s important to be cautious and examine Coinbase’s excessively high valuation multiple now that the hype has subsided. Coinbase Rode on Bitcoin’s Coattails Regrettably, I cannot refrain from pointing out that after I urged investors to take profits, Coinbase shares fell from $265 to $218. Coinbase could not continue to rest on its laurels indefinitely. Due to the anticipation surrounding spot Bitcoin ETFs and the Bitcoin halving, Coinbase received more attention. When stocks make headlines in the financial media, though, contrarian and value investors should refrain from purchasing them. Coinbase and other cryptocurrency-related companies could be thought to be invincible following the Securities and Exchange Commission’s approval of spot Bitcoin ETFs. Coinbase management is now quite daring, even going so far as to sue the SEC over the legal standing of cryptocurrency. Along the way, Coinbase keeps profiting handsomely from cryptocurrency transactions. Dan Dolev, a Mizuho analyst, acknowledges this but also raises a significant worry that wise investors should carefully examine. A Bearish Price-Target Raise for Coinbase Stock? Coinbase’s price objective was recently increased by Dolev from $84 to $145, but don’t misunderstand. Dolev indicated that Coinbase’s “rich valuation” was a concern, along with pressure on the company’s fees from rivals and other factors. Different valuation methods exist. According to Dolev’s research, Coinbase is presently trading at a “lofty” multiple of 26 times its anticipated EBITDA for 2025. According to Dolev, “This is much higher than the 11-16x median for competitors in payments, exchanges, and asset managers.” I utilize my own metric, which is a traditional one that you are likely familiar with. To be precise, Coinbase’s trailing 12-month price-to-earnings (P/E) ratio, as determined by GAAP, is 573.96x. The sector median trailing P/E ratio is 10.58x, to provide you some perspective. Coinbase Stock: A Good Company at a Not-so-Good Price I don’t really criticize Dolev for raising his target price for Coinbase shares. Due to the attention surrounding spot Bitcoin ETFs, the stock had risen much above his previous target, thus Dolev had to adjust. The hype was not expected to last indefinitely, and Coinbase stockholders are now susceptible to a sharp decline. As a result, investors should start acquiring when Coinbase shares hit $165 since the valuation will be more reasonable. Until then, step aside and let the pursuers go after their own detriment.
Coinbase: A Good Company Overvalued by the Market
