The past year has been a wild ride for equity markets, with growth outperforming value and risk-on assets, including cryptocurrencies, seeing significant gains. Among the players in the crypto exchange market is Coinbase, which has been in the bull/bear argument since going public less than two years ago. While fundamentals remain challenging for the company, including depressed revenue estimates and consistent losses, technical analysis suggests a bullish outlook as the stock trended higher after a sizable job cut in December 2020. However, the direction of Bitcoin, which is strongly linked to Coinbase’s performance, remains a key factor to consider.
Important Details about Coinbase Stock Rose Over 91% This Year: Is It A Buy Opportunity? (NASDAQ:COIN) –
– The behavior in equity markets this year suggests that we’re likely to see higher prices in risk-on assets, including cryptocurrencies like Coinbase.
– Coinbase has been volatile and has strong ties to the price of Bitcoin.
– The chart suggests a favorable setup for Coinbase, with moving averages trending higher and momentum indicators looking positive.
– Fundamental factors like revenue revisions and the company’s operating losses are a key risk for owning Coinbase.
– Seeking Alpha’s Quant Ratings upgraded Coinbase from sell to hold, which is a positive sign for the bulls.
– Two scenarios for the future include a breakout in Bitcoin and higher revenue revisions for Coinbase, or a downside risk if Bitcoin fails to break out and retests recent lows.
– There is also regulatory risk for anything crypto-related.
Leon Neal is a well-known financial expert who has a bullish outlook on equity markets in the coming years. Despite facing challenging fundamental news, Neal believes that a lot of money is flowing into risk-on assets, which should drive up the market by the end of 2023. Growth is outperforming value, the Nasdaq is outshining the S&P 500, and Crypto markets are another arena where risk seekers are pumping money.
Coinbase, a major player in the crypto exchange market, has been embroiled in a bull/bear debate since its IPO less than two years ago. The firm generates massive revenue when cryptos are flying, but that flow works both ways. There has been a lot of negative news in recent months, and that has significantly affected Coinbase. The last time Neal wrote about the company was in December 2021, and he recommended a buy rating on the stock, which has since grown by 47%. This year, the stock has risen by an impressive 92%.
The question many investors are asking is whether Coinbase’s stock is still a buy after such a significant gain. To answer that, Neal analyses some indicators that he likes to use. Starting with the chart of the stock, Neal observes that the moving averages are trending higher, and the momentum indicators are positive, which is bullish market behavior. The final graph panel shows the correlation of Coinbase’s stock price to the Bitcoin price over the past year. Coinbase’s fate is now closely tied to Bitcoin prices, making it essential to look at Bitcoin’s path.
Despite a failed breakout earlier this week, Neal remains constructive on Bitcoin’s prospects. There was a decisive breakout at the $25k level, followed by a quick failure. Neal believes Bitcoin is still set to break out and go much higher, and if that happens, Coinbase’s stock will follow suit. Neal notes that Coinbase’s short interest is still relatively high, and if the bull market takes over, there could be a sizeable rally due to short covering.
Fundamentals Matter, But Remain Challenging for Coinbase
Neal acknowledges the importance of fundamental values when investing in stocks. He examines Coinbase’s revenue revisions, which flew higher during the crypto boom, but estimates have plummeted since then. Neal believes the revised estimates can move up again if Bitcoin’s price continues to rise. However, Coinbase’s financials remain soft, and its short interest is still relatively high. Neal believes the worst is over for Coinbase, and an upgrade from sell to hold by the Quant model supports this view. However, the upgrade is not an all-out buy signal for Coinbase stock.
Looking Forward
Neal outlines two basic scenarios to consider. The first and preferred scenario is that Bitcoin sharpens its price and then breaks out over the 25k level. If that happens, Coinbase’s stock will soar as revenue revisions will likely move higher. The second scenario is that the 25K level in Bitcoin holds as resistance, and Bitcoin retests its former lows. In this case, Coinbase could experience significant downside, and investors should have a stop level in place based on their risk tolerance. Neal notes that the regulatory risk for anything crypto-related remains high.
Conclusion
Leon Neal is optimistic about the equity market’s future, despite facing challenging fundamental news. He remains bullish on Coinbase’s prospects despite it facing significant headwinds. Neal analyses the charts and positive momentum indicators, but cautions investors to keep an eye on Coinbase’s soft fundamentals and its potential financial risk, particularly given its short interest. Neal’s overall message is that while Coinbase’s future looks good, it is essential to keep a close eye on Bitcoin’s price movements and the regulatory environment.