It might have been the most foregone conclusion of the week as Coinbase (NASDAQ:COIN) rolled out its first day of trading to downright explosive results. Though it went forth in unconventional fashion—which is par for the course for the cryptocurrency exchange—the end result was a fairly substantial win for the company and its investors as well.
A Frantically Up-and-Down But Mostly Up Day
Coinbase came onto the market in somewhat unconventional fashion; instead of entering via an initial public offering (IPO), it instead went for direct listing. Several stocks have taken this route previously, including Palantir (NYSE:PLTR), Slack (NYSE:WORK), and Spotify (NYSE:SPOT), but it's not an approach that's commonly used.
With a direct listing, companies don't issue new shares, or look for extra capital. They also don't engage in any underwriter connections. A direct listing is basically what the name implies: the company opens its current pool of shares directly to the public.
The public, meanwhile, pounced. Coinbase led off with a “reference price” of $250 per share. The stock, meanwhile, begged to differ, opening at $381 per share. The stock then began a wild, whipsawing ride of ups and downs that saw share prices go as low as $310 and as high as $429 before closing out its first day at $328.28. Using that value, and including all the company's outstanding shares, Coinbase ended the day with a valuation of $85.7 billion. That's over 10 times the company's last valuation before going public.
A Bullish Analyst Front
While that kind of volatility might scare off some investors, and not without reason, the analyst front seems a lot less concerned about that crazy first day. In fact, based on our latest research, Coinbase is an increasingly attractive buy.
Analyst coverage hasn't been going on for long, but it's gained rapidly. Last month, the company had one “buy” rating to its credit, and today, it has three. The price target, meanwhile, is optimistic for every one of those “buy” recommendations. Moffett Nathanson currently has a $600 price target, while BTIG Research is a bit more conservative at $500. DA Davidson, meanwhile, upgraded its price target from a former Street low of $440 to a new high of $650.
Wedbush's Dan Ives noted that there had been “lingering worries” about the market's overall appetite for cryptocurrency and, by extension, Coinbase. However, the first day of trading certainly went well, to the point where Ives referred to it as “...a home run success on the first day...”.
Cryptocurrency Might be the Wave of the Future After All
Coinbase's biggest selling point right now is that it's one of the best ways—honestly, one of the few ways—to trade cryptocurrency out there. That's been improving in recent days, but Coinbase still has some excellent name recognition to its credit, as well as an easy way to benefit from the crypto market's halo effect. That makes Coinbase look better thanks to its massive connection to the broader cryptocurrency market. Coinbase is the vehicle many use to get access to everything from Bitcoin to Dogecoin and beyond, so every time something good on that front happens, Coinbase looks a little better as a result.
While Coinbase is likely to come under fire from some competition in the market—eToro, Robinhood and Kraken come to mind, for starters—its presence in the long term will serve to give it a lot of extra firepower in the market. Longevity implies trustworthiness, and considering the sheer amount of information that most market apps require—some even want bank account information—trust is a vital commodity. Coinbase's longevity in the market should help provide that sense of trust necessary to draw new users and keep the old ones.
For those who think that the cryptocurrency market itself is a flash in the pan on par with Beanie Babies back in the late nineties, there's more to the picture. Beanie Babies, after all, never represented a potentially very easy way to trade with other countries. Since cryptocurrency acts as a kind of proxy for cash, it becomes easy to trade in that currency. Agreeing on a price per unit in a cryptocurrency allows for streamlined cross-border trading, and anything that streamlines the path of trading usually both saves money and encourages use. Thus, cryptocurrency's chances of fading into obscurity, like Beanie Babies did, are comparatively slim. It's too useful to be thrown aside as just another fad.
Coinbase's success has made itself plain. Though admittedly, this is still very early days for the company, it's easy to forget that Coinbase has been around a long time. Those putting investment into Coinbase are likely to have a piece, of sorts, of the entire crypto market for years to come. That's a valuable place to be, as long as the crypto market itself produces value.
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