Key points:
- COIN stock has lost over 40% of its value since the company's listing in April last year
- The recent NFT marketplace venture is incredibly costly, and NFT demand looks to be waning
- Mizuho analyst Dan Dolev cuts price target to $190 from $220, based on strong risk
Since the company’s public listing in April last year, Coinbase (NASDAQ: COIN) stock hasn’t exactly reflected the momentum of digital currencies such as Bitcoin and Ethereum; two of the platform's most traded assets. COIN has lost over 40% of its value since its debut, struggling amid a volatile environment and tightening market competition from rival companies like Robinhood. Recently though, Coinbase is embarked on a whole new venture; but dwindling in topicality, it’s left investors apprehensive about future financials.Â
If you’re familiar with digital assets, then the phrase ‘NFT’ should ring a few bells. Whether alarm bells or something more appealing, NFTs are undoubtedly still a fledgling trend, and according to Google search data, the hype seems to be dwindling at the same pace it sprouted. So it might not be good news for Coinbase investors bearing in mind the company is about to spend heavily on its new NFT marketplace.Â
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Those that argue the marketplace could be a good source of new revenue aren’t completely wrong, but investors shouldn’t overlook the costly nature of such a venture, especially given that company EBITDA losses could be $500M this year. Mizuho analyst Dan Dolev cut the price target on Coinbase to $190 from $220, maintaining a Hold rating on the basis of such an unwarranted expenditure for the company at a time of financial fragility. He claims that the company could spend up to $300M on NFTs which would represent an overall 130% increase in operating expenses year-over-year.Â
COIN shares will likely feel the pressure of the NFT venture over FY22. If momentum in the NFT space does wane, then Coinbase will be drastically more financially exposed than they already are.