Analysts at Mizuho Securities released a report that questioned Coinbase's move into the non-fungible token (NFT) marketplace business and cut its price target from $220 per share to $190 per share.
The basis of the report centers around Coinbase spending approximately $300 million, based on Mizuho's estimates, to build an NFT marketplace that should launch soon. But that marketplace is coming into an NFT market that's cooled off from daily sales of $400 million in August 2021 to $70 million recently.
That may sound like a big drop, but the August figures are an outlier and even declining search trends that were highlighted are short-term in nature. NFTs were almost non-existent just a year ago and now they're potentially a multi-billion dollar business for Coinbase. The short-term expense for the long-term gain from this investments seems wise, even if it means profits will be down in 2022 when spending peaks.
While the short-term impact of the NFT marketplace may be lower net income, that doesn't mean it's a bad move long-term. Coinbase is building out the crypto ecosystem and wants to have one platform for users to interact with. NFTs will play a big role in that and I think it's a good move to have a marketplace, even if the result from that investment won't be realized for a few years.