Coinbase Global (NASDAQ:COIN) provides a go-to cryptocurrency exchange for legions of traders. Moreover, the company is expanding into the red-hot non-fungible token (NFT) space. However, not everyone is enthusiastic about Coinbase’s foray into the emerging world of digital collectibles.
On April 5, Coinbase shares traded 7% lower midday. Even for this crypto-related stock, 7% is a sizable single-session price move. What’s going on, exactly?
It’s not difficult to identify the culprit. Reportedly, Mizuho analyst Dan Dolev just slashed his price target on COIN stock from $220 to $190.
Dolev is a well-respected analyst, so his price targets matter. He’s able to influence share-price moves sometimes, and Coinbase’s investors may be suffering from collateral damage.
Granted, COIN stock has fallen from $340-ish to less than $200 during the past year. So, it’s understandable that some analysts will need to reduce their price targets.
Still, Dolev’s price-target reduction cuts deep. Apparently, the analyst questions Coinbase’s “strategic rationale of chasing NFTs, especially as interest in NFTs appears to be dwindling.”
In defense of this claim, Dolev relayed an analysis of internet searches indicating that the hype surrounding NFTs has slowed.
That certainly may be the case. However, Coinbase’s bread and butter is cryptocurrency transactions, plain and simple. NFTs are a new venture for the company, not the crux of its business model.
A survey conducted by Nickel Digital Asset Management, a London-based cryptocurrency hedge fund, found that a majority of professional investors believe that digital assets will become mainstream. Specifically, eight out of 10 respondents in the study said that they see wider use cases for cryptocurrencies.
Moreover, the study’s respondents noted the diversification benefits of cryptocurrency in their portfolios. Consequently, Coinbase can continue to lean on its primary business: helping people and businesses to buy and sell crypto.
Besides, there’s no need to prematurely declare the death of the NFT market. To that point, Needham analysts estimated that Coinbase could generate, in a bullish case, additional revenue of $1.26 billion from its NFT business.
Finally, even with Dolev’s skepticism about Coinbase’s NFT segment, the analyst’s $190 price target isn’t extremely low. It’s actually above the current share price, so take his price prediction with a grain of salt and feel free to stay invested in COIN stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.