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Market Analysis
Coinbase (COIN) Shares Dip in Premarket After Stock Downgrade by JPM; $80 PT
Coinbase staged a jaw-dropping rally in 2023 but JPMorgan analysts anticipate that the exchange is unlikely to replicate such a strong performance in 2024.
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Shares of Coinbase (NASDAQ: COIN) slipped 5% in premarket trading Tuesday after JPMorgan (NYSE: JPM) analysts demoted the stock and set a price target with a significant downside from the current price per share. The analysts foresee a tough landscape for Coinbase in 2024 and express skepticism about the potential positive impact of the newly approved Bitcoin exchange-traded funds (ETFs).
Coinbase Downgraded to Underweight by JPM Analysts
On Monday, JPMorgan analysts downgraded Coinbase’s shares from Neutral to Underweight and maintained the price target of $80 per share, implying a downside risk of more than 37% from the current share price.
Following the note’s release, shares of Coinbase fell more than 5% in premarket trading Tuesday. Meanwhile, Bitcoin was around $39,100 on the day, down over 1% in the past 24 hours.
JPMorgan Predicts Challenging 2024 for COIN After Impressive Performance Last Year
The move by JPMorgan comes amid concerns about the impact of recently launched Bitcoin ETFs on the overall ecosystem. Analysts are concerned that “the catalyst in Bitcoin ETFs that has pushed the ecosystem out of its winter will disappoint market participants.”
“Cryptocurrency prices are already under pressure; with Bitcoin falling below $40k as of the writing of this note, we see greater potential for cryptocurrency ETF enthusiasm to further deflate.”
– analysts led by Kenneth B. Worthington said in a Monday note.
In turn, the waning enthusiasm is expected to put further pressure on token prices and trading volume and reduce ancillary revenue opportunities for companies like Coinbase.
Coinbase staged an impressive performance in 2023, JPMorgan acknowledged, with Coinbase’s stock price outperforming the broader US stock market by some distance. However, Worthington predicts a more challenging year for the cryptocurrency exchange in 2024, despite the company’s ongoing progress in various initiatives, such as developing derivatives and its Layer-2 Base.
“We value the stock on a normalized earnings power at $80/share, suggesting downside of 35% in its shares.”
– analysts wrote.
Last year, Coinbase launched an international exchange for crypto derivatives to attract non-US institutional investors interested in trading in perpetual futures. In August, the company rolled out Base, a layer-2 blockchain built to scale the user base on-chain.
In your opinion, can Coinbase stock outperform the broader market once again despite a challenging environment? Let us know in the comments below.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
