The stock price has sputtered since the big announcement. Coinbase (NASDAQ:COIN), the leading crypto exchange, made a big move this week to expand into stock trading and prediction markets, to become a one-stop shop for all things investments. Since the announcement Wednesday afternoon in San Francisco, the stock price has mostly sputtered. In fact, Coinbase shares fell on Thursday by 2% to around $239 per share. The stock price did bounce back on Friday, rising about 1.5% at the open to roughly $243 per share, so it seems the investment is fairly mixed on Coinbase following these moves. Or are they? Let’s take a look at the new product roll outs and what may be causing the volatility. The everything exchange Coinbase has made a major push to be the everything app for investors, adding stock trading and prediction markets through a partnership with Kalshi to its leading crypto trading platform. “For the last thirteen years, Coinbase has been building toward a new financial system. One that is always-on, more efficient, and accessible to everyone in order to drive greater economic freedom around the world. Today, we’re taking a major new step toward becoming the Everything Exchange – dramatically expanding the assets available to trade on Coinbase, including novel cryptocurrencies, stocks, perpetual futures, and prediction markets,” officials said. Stock and ETF trading on Coinbase began this week in the U.S. and early next year it will roll out globally. Coinbase officials believe that eventually, everything will be tokenized, including stocks, which means stocks will essentially be digitized so they can trade on the blockchain. So bringing stocks to Coinbase is key to tokenizing stocks. Toward that end, the company plans to launch Coinbase Tokenize in the near future. The company describes it as an “institutional platform for tokenizing real-world assets.” Coinbase is also now offering prediction markets on its platform in the U.S., through a partnership with Kalshi. Investors will be able to trade on the outcomes of events like elections, sports, collectibles, and economic indicators. “A wider marketplace for predictions creates an avenue for more informed trading activity, and we plan to support contracts from additional prediction market platforms in the coming months. The 2% drop for Coinbase stock on Thursday may have had more to do with a drop in price for Bitcoin, as Coinbase stock is pretty well tethered to the price movements of crypto and Bitcoin. And that’s one of the major reasons that Coinbase is looking to expand into stocks and prediction markets. Analysts were mostly positive on the Coinbase news, although someone mixed. Cantor Fitzgerald lowered the price target from $459 per share to $320 per share, but maintained a buy rating. The reduction was more out of near-term concerns about the crypto market and a potential “crypto winter,” per the Fly. Deutsche Bank set a price target of $340 per share and a buy rating on the news. It said the new everything exchange strategy should widen its addressable market, diversify its products, and mitigate potential pricing pressure on crypto trading. Mizuho lowered its target to $280 per share from $320 per share, while Goldman Sachs reiterated its neutral rating and price target of $294 per share saying the new products should strengthen its competitive position. Coinbase stock has a median price target of $390 per share, which would indicate some 63% growth over its current price. The stock is down about 2% YTD and has a low P/E ratio of 20, but a higher forward P/E of 26, which suggests that analysts expect an earnings decline. That would be related to expectations about a more challenging crypto environment. While Coinbase’s move into prediction markets and stock trading look like a winning long-term strategy, things could be a bit rocky in the short-term. Investors should be selective here and look for a good opportunity to get in.
Is Coinbase Stock A Buy After Move into Stocks, Prediction Markets?
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