We recently published a list of 10 Stocks with Potential to Explode in 2025. In this article, we are going to take a look at where Coinbase Global, Inc. (NASDAQ:COIN) stands against other stocks with potential to explode in 2025.
The recent pullback in US equities can be a sign of an aging bull market and a reaction to developments happening around trade policy, as per Jurrien Timmer, Director of Global Macro for Fidelity Management & Research Company. Corrections and volatility are the factors investors need to consider to capture any sort of long-term market returns. The current volatility has got many investors worried regarding the prospects of losing their gains.
Pullbacks Are Part and Parcel
As of March 11, the S&P 500 Index declined 9.3% from its all-time closing high it touched in mid-February, says Timmer. According to him, the market has seen a decline of 5% or more in 93% of calendar years since the year 1980, and it has suffered a 10% or more drop in 47% over the same calendar years. Yet, its average calendar-year return over a similar period has been ~13.3%. This means that pullbacks are quite common in the equity markets. The broader market has seen recovery from every one of those periods and has delivered healthy long-term returns.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Expert’s Views on Current Market Dynamics
Timmer opines that bull markets generally take place when there are expectations that the news can’t get any worse. The markets are forward-looking, meaning that stocks always showcase the expectations regarding the future. Even if the current news is not favorable, if investors think that tomorrow’s news will be less bad, the prices might start to increase. In this stage, the market continues to increase despite a decline in profits or earnings. This reflects that the higher P/E ratios have been fueling the market. After 2 – 4 quarters, the profits start to show up. Now, as the bull market matures, earnings growth tends to take charge, with the PE ratios beginning to decline.
As per Timmer, the market investors are in this environment. The earnings growth remains in the double digits, but since investors are getting into the later innings of the bull market, the P/E ratios have now been stretched. The broader market is slightly more prone to fluctuations or volatility. Apart from these trends, the market continues to process the impact of current trade policy shifts. Overall, Timmer said that across all different cycles, booms, crises, and busts, the markets eventually recovered and touched new all-time highs.
Our Methodology
To list the 10 Stocks with Potential to Explode in 2025, we sifted through several online rankings to shortlist the stocks that analysts see significant upside to, as of March 18. Next, we mentioned hedge fund sentiment around each stock, as of Q4 2024. Finally, the stocks were arranged in ascending order of their hedge fund sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A shot of someone securely accepting crypto assets as payment, showcasing the company’s payment solutions.
Coinbase Global, Inc. (NASDAQ:COIN)
Average Upside Potential: ~89%
Number of Hedge Fund Holders: 69
Coinbase Global, Inc. (NASDAQ:COIN) operates the platform for crypto assets in the US and internationally. Bernstein initiated coverage of the company’s stock with an “Outperform” rating and a price objective of $310. The firm anticipates that strong regulatory tailwinds are expected to fuel the crypto industry to the American financial mainstream. The firm’s analysts opine that Coinbase Global, Inc. (NASDAQ:COIN) remains well-placed to benefit from the shifting regulatory landscape under the new administration.
While Bernstein acknowledged the challenges related to the growing competition from fintech firms, brokers, and banks, the analysts led by Gautam Chhugani believe that a robust bull market as well as higher US onshore dominance are expected to more than offset the pressures. Furthermore, regulatory uncertainty was a thorn in the crypto industry’s side, but this can change quickly. The firm hinted at Donald Trump’s commitment, which can act as a tailwind for Coinbase Global, Inc. (NASDAQ:COIN). Notably, the analysts expect growth in the non-trading revenues, which can help balance the volatility of trading revenue.
Patient Capital Management, a value investing firm, released the Q4 2024 investor letter. Here is what the fund said:
“The top performers in the fourth quarter were once again Financials and Travel names. We’ve been over-indexed to them since the pandemic, which has served us well. We strategically added to certain financial names like Sofi Technologies (SOFI) and Coinbase Global, Inc. (NASDAQ:COIN) during the year. Both companies rebounded strongly in the fourth quarter. We believe Coinbase is building the platform for the crypto ecosystem. Certain recent advances (wallet, base improvements, USD Coin) could cause an adoption tipping point. We like that Coinbase continues to widen its moat by persistently investing in innovation.”
Overall, COIN ranks 4th on our list of stocks with potential to explode in 2025. While we acknowledge the potential of COIN as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than COIN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
