Crypto stocks, like crypto overall, face a volatile environment that shifts quickly and is affected by domestic and global policy. Stablecoins have taken the spotlight currently. Many developed economies are regulating stablecoins but the United States looks unlikely to follow suit. Regulation of U.S. stablecoins threatens the U.S. dollar and its dominant position. It’s a complex situation that will evolve but won’t stop the development of the crypto space.
It’s another page in the larger saga of cryptocurrency. Publicly-traded companies that invest in crypto substantially have some form of an opportunity. Let’s look at a handful of the better-known firms fitting that profile.
Block (SQ)
Block (NYSE:SQ) is one of the leading crypto stocks, and is noted for its significant reliance on Bitcoin (BTC-USD).
Most readers will be well aware that SQ shares declined dramatically despite strong forecasts moving forward. Q2 revenues were better than expected, and earnings were a bit below expectations. There’s really not any great explanation for why shares have fallen as much as they have since late July. The best explanation I’ve read isn’t very convincing at all. That comes from Jefferies analyst Trevor Williams who stated that Block’s earnings report “lacks oomph.”
I can make an equally subjective assessment but with a bullish take: Block shares are suddenly as cheap as they’ve been in years, and the rest of Wall Street believes they’re worth more than $85.
Block generated $1.96 billion in Bitcoin revenue in the most recent quarter. That’s pretty good for simply facilitating the purchase thereof. Furthermore, Block is a major fintech player due to Cash App. Fintech growth is expected to be very strong for some time, and Cash App’s profits increased by 37% in Q2. The price drop is an opportunity.
PayPal (PYPL)
PayPal (NASDAQ:PYPL) stock is in a similar position to Block. In fact, disappointment surrounding its earnings contributed to Block’s decline as the two are seen as peers ,and PayPal released earnings earlier.
Those concerns were laid out in this Barron’s article, but amounted to general fears about the larger macroeconomy and a few internal hiccups with metrics. The fears seem overstated. PayPal still did better than Wall Street was expecting, and as with Block, PayPal got dinged nevertheless. The result is similar: PayPal shares are as cheap as they’ve been in quite some time.
PayPal also launched a USD stablecoin which is 100% backed by U.S. dollar deposits, treasuries and other securities. PayPal USD (PYUSD-USD) will connect all of the fiat currencies and digital currencies that PayPal supports and deepens its digital innovation. That means if you have dollars in your PayPal account, you can transfer them for PYUSD at a one-for-one rate. With stablecoin news hitting the airwaves, you should definitely consider PayPal.
MicroStrategy (MSTR)
It’s logical to anticipate that MicroStrategy (NASDAQ:MSTR) will fall in the immediate future. The price of Bitcoin is falling as I write this, and at $26k it is below MicroStrategy’s average purchase price of $29,672.
The company has now acquired $4.53 billion in Bitcoin. Were the company to sell all 152,800 of the Bitcoin it owns, it would incur a loss of roughly $500 billion. I expect MicroStrategy to increase its BTC holdings given the current price of Bitcoin. The firm spent $361.4 million in the second quarter, and acquired 12,800 additional Bitcoins.
Investors are going to have difficulty choosing an entry point at which to buy MSTR shares. They’ve ranged from $160 to $460, and have fallen to $330 since. Wall Street has shares pegged at $450, so everyone is pretty much taking a stab in the dark. The single piece of data I can give to suggest that it makes sense at $330 is that its current price-to-earnings ratio of 36.5 is below its 10-year median of 40.9. Amidst news of stablecoins, this is a great stock to consider.
On the date of publication, Alex Sirois 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.
