An analyst described shares of Coinbase Global Inc (NASDAQ: COIN) as a “must-own” ahead of the cryptocurrency exchange’s record direct listing Wednesday.
Ellis said she was positive on the outlook for cryptocurrencies “as a massively disruptive technology.”
“Coinbase, as the only U.S.-listed large-cap stock and the market leader in the space, is really a must-own asset if you’re a growth or tech-oriented [investor] with a multiyear time horizon,” Ellis told Yahoo! Finance.
Coinbase shares ended Wednesday 13.83% lower than their opening price but 78.3% higher than the $250 reference price assigned for the direct listing by the Nasdaq a day earlier.
Why It Matters: Ellis justified her $600 price target by applying a 20-times forward multiple to Coinbase’s 2023 revenues, which is in line with other tech peers, as per Yahoo! Finance.
Ellis’ number also factors in a 35% fall in cryptocurrency transactions for next year, based on an assumption that Bitcoin (BTC) will be less exuberant in 2022 than in 2021 due to its historical boom-and-bust cycles.
BTC and the second-largest cryptocurrency by market cap Ethereum (ETH) both all-time highs on Tuesday. They’ve since touched new highs of $64,863.10 and $2,480.85 on Wednesday.
BTC and ETH traded 0.28% and 7.97% higher at $63,357.78 and $2,477 respectively at press time.
“With Coinbase, because of their tie to the crypto markets, it’s going to be a bumpy ride,” said Ellis.
The analyst reportedly warned investors they need a “strong stomach.” On the 35% drop in trading volumes she projected for 2022, she said it was based on BTC’s fall in 2018 post hitting an all-time high in 2017.
However, Ellis noted that the next fall may be less severe due to “institutional holdings.”
Price Action: Coinbase shares closed 31.31% higher at $328.28 in regular trading on Wednesday and rose nearly 3%in after-hours to $338.
Photo by Marco Verch on Flickr
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