We recently published a list of 11 Biggest AI and Tech Stock Analyst Upgrades and Downgrades in July So Far. Since Coinbase Global Inc (NASDAQ:COIN) ranks 9th on the list, it deserves a deeper look.
As soon as the latest softer-than-expected inflation data numbers were out, investors began to take profits from major tech stocks and pour money into small-cap companies amid hopes of rate cuts. However, some were quick to call the latest decline in tech stocks the end of the AI-fueled rally that has pushed stock valuations to eye-popping levels. But there are some Wall Street analysts who believe this is just a short-term trend and large tech and AI stocks have a lot of room to grow. Samantha McLemore, CIO of Patient Capital, said while talking to CNBC that the “bull market continues and the path of least resistance is higher.”
The analyst said that she has been in the market for a long time and investors have been worrying about the end of the bull market since 2009, while the S&P 500 has grown over 1000% (17% per year) since then.
“We don’t see any end to the bull market. We do think there’s a good chance we see a rotation and small caps, the laggards, do much better in the second half of the year as the Fed starts to cut rates.”
Some analysts believe the latest decline in tech stocks is yet another opportunity for long-term investors to pile into AI stocks for gains. In this backdrop, we decided to take a look at the top AI stock upgrades and downgrades this month. With each stock, we have mentioned the number of hedge fund investors. 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Coinbase Global Inc (NASDAQ:COIN)
Number of Hedge Fund Investors: 48
Wolfe Research earlier this month published a list of stocks that can benefit from a Trump presidency. Coinbase Global Inc (NASDAQ:COIN) was part of the list. However, Raymond James has warned that Coinbase is expected to post softer results in the second quarter when compared with the first quarter as trading volumes on its platform weakened sequentially in the face of lower token prices.
As regulators approve crypto ETFs and Bitcoin continues to gain ground, cryptocurrencies are seeing wide acceptability and moving beyond the stage when they were disregarded as something speculative. Being one of the largest crypto exchanges in the world, Coinbase Global Inc (NASDAQ:COIN) is positioned well to benefit from the growth of crypto. During the first quarter Coinbase Global Inc (NASDAQ:COIN) revenue doubled year over year to roughly $1.59 billion, driven by transactional revenue, subscription revenue and fees.
EPS estimate for Coinbase Global Inc (NASDAQ:COIN) this year is $7.24 per share, representing an astonishing 1,856.73% year-over-year growth. In contrast, the sector median growth is a mere 3.42%. However, Coinbase Global Inc (NASDAQ:COIN) valuation has been a concern for many. The stock’s forward P/E is 31. Given Wall Street’s revenue growth estimate of just 0.70% for next year and earnings growth estimate of -36%, this valuation is high. Analysts also believe the popularity of crypto ETFs and retail investors embracing trading platforms like Robinhood does not bode well for Coinbase Global Inc (NASDAQ:COIN) since investors would prefer to directly invest in crypto ETFs and currencies instead of investing in Coinbase stock.
Coinbase Global Inc (NASDAQ:COIN) is a promising play for those with a higher-risk appetite. However, for those who want to avoid the roller-coaster ride of crypto volatility, the stock might not be a good choice.
Patient Capital Opportunity Equity Strategy stated the following regarding Coinbase Global, Inc. (NASDAQ:COIN) in its first quarter 2024 investor letter:
“This quarter we benefited from our exposure in the cryptocurrency space. The approval of 11 new spot Bitcoin ETFs dramatically opened Bitcoin to new investors for the first time. Investors’ interest was material, with assets under management growing to $55B over a single quarter. Coinbase Global, Inc. (NASDAQ:COIN) was a beneficiary of these events as we believe it is building the foundation of the crypto-ecosystem. We continue to believe COIN has the potential to be the platform for crypto as it has continued to widen its moat by investing throughout the most recent crypto winter.”
Overall, Coinbase Global Inc (NASDAQ:COIN) ranks 9th on Insider Monkey’s list titled 11 Biggest AI and Tech Stock Analyst Upgrades and Downgrades in July So Far. While we acknowledge the potential of Coinbase Global Inc (NASDAQ:COIN), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an 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.
