Shares of Coinbase Global (COIN 4.13%) have been on a stunning run during the past several months. The cryptocurrency trading platform has been a beneficiary as more investors have easy access to Bitcoin, and the leading cryptocurrency has increased in value.
That led one analyst to give Coinbase stock a big price target boost last week. But that doesn't mean Mizuho analyst Dan Dolev thinks you should buy the stock. Even after raising his firm's target price from $84 to $145 per share, the analyst says to sell the stock. That's because the new price target represents almost a 40% drop from Coinbase's recent share price.
NASDAQ: COIN
Key Data Points
The Bitcoin frenzy
Dolev's huge bump in the target price for Coinbase stock comes after the shares soared nearly 90% during the past three months. The Securities and Exchange Commission (SEC) recently approved exchange-traded funds (ETFs) for spot Bitcoin. That has created more interest in owning the cryptocurrency.
But Dolev thinks that interest has become an unsustainable frenzy. His higher price target is an acknowledgement of the boost in crypto trading volumes. Coinbase collects trading fees, so the increased activity has boosted its revenue.
Dolev noted, however, that despite "a favorable near-term setup, our long-term fundamental concerns remain." Those concerns include competitive pressure that could hurt fee income, and "lower quality" trading of smaller crypto tokens.
Even Coinbase Chief Financial Officer Alesia Haas acknowledged in an interview with Barron's that "when our stock rallies, it is a reflection of the broader sentiment around the future of crypto more than a reflection of Coinbase financials or our near-term financial performance."
That broader sentiment has given something of an artificial boost to Coinbase shares. Additionally, investors who purchase Bitcoin ETFs don't need to use Coinbase as an exchange. Those factors lend support to Dolev's view that investors would be wise to take profits after Coinbase's recent stock gains.
