COIN Stock Is Undervalued as Coinbase Has ‘Hidden Value’ in Its VC Arm

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by Benjamin Godfrey · 3 min read
COIN Stock Is Undervalued as Coinbase Has ‘Hidden Value’ in Its VC Arm
Photo: The Coinbase Blog

The market or business model of Coinbase and the stock outlook are highly dependent on the performance of Bitcoin and the broader digital currency ecosystem. 

America’s largest cryptocurrency trading platform Coinbase Global Inc (NASDAQ: COIN) went public in grand style via Direct offering last year April with the stock reference price pegged at $250. Since its debut, the stock is now trading at $153.19, having trailed the broader market losses that have engulfed tech companies on Wall Street.

Despite the bearish outlook of Coinbase stock, Oppenheimer’s research analyst Owen Lau says the company’s stock is highly undervalued. Lau attributes the undervaluation to the fact that investors seem oblivious to the “Hidden Value” the company has in its Venture Capital arm. In the note to clients, the Oppenheimer analyst noted that the firm’s venture capital investments are not yet reflected in the company’s financial outlook, however, they are strategically important seeing the investment is hinged on every aspect of the blockchain and emerging technologies.

Lau positioned the company’s investments at around $6.6 billion. The company has invested in more than 250 startups through the fourth quarter of 2022 with a carrying value of about $352 million at cost basis.

“Our sensitivity analysis shows that the market value could go as high as $17.0B, assuming a 13% ownership stake,” Lau wrote. “Given the continuous capital influx to blockchain/digital assets, there is potential upside to our estimate.”

While Coinbase had hit an All-Time High (ATH) of $342.98, Lau is projecting a target price of $377 for Coinbase shares. While Lau is not discounting the impacts of the industry volatility, he believes Coinbase is destined to see better days than where it is at this time.

Coinbase Stock and the Bitcoin Correlation

The market or business model of Coinbase Global Inc and the stock outlook are highly dependent on the performance of Bitcoin (BTC) and the broader digital currency ecosystem.

In periods of extremely bullish market momentum, Coinbase tends to see a heightened trading volume, a trend that translates into high revenue and income when considered on a quarterly basis. Equally, when the market momentum is down, traders and investors generally steer clear of the market, a scenario that impacts the company’s inherent performance.

At this time, Bitcoin and the crypto ecosystem are more or less in a consolidation stage and trading volumes are generally low as a number of economic factors have kept investors off risky assets that Coinbase generally trades in.

The business diversification strategy of Coinbase is on track to make it maintain its earnings and valuations in the near future as its investments are all involved in real-time enterprise solutions that yields beyond the normal hype that boosts crypto trading as a whole.

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Benjamin Godfrey

Benjamin Godfrey is a blockchain enthusiast and journalist who relishes writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain media and sites.

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