Coinbase Stock’s ‘Distress Level’ Offers a Long-Term Opportunity, Says Oppenheimer

Whether you’re a crypto fan or not, the industry never lacks for drama. The past week was particularly buzzy after the stablecoin TerraUSD de-pegged from the U.S. dollar and sent crypto prices tumbling across the board, causing fears the space could go into total meltdown.

The debacle provided more food for the crypto bears who also had plenty to feast on based on Coinbase’s (COIN) latest disappointing quarterly report. The soft start to the year being a reflection of the market’s downturn.

Adding more fuel to the fire, Coinbase’s latest 10Q filing had a new risk factor added, which to some seemed to imply that users could lose funds if Coinbase went bankrupt. This was followed by a tweet by CEO Brian Armstrong on the matter, who reassured users their “funds are safe.”

Investors were left mulling over the prospect of Coinbase caving in, but Oppenheimer’s Owen Lau thinks the whole issue is nothing more than a storm in a teacup.

“We believe the Tweet from CEO Brian Armstrong is vastly misunderstood and being taken out of context,” says the analyst. “First, in our view, this additional disclosure is required by the new SAB 121 instituted in March 2022, and shouldn’t be interpreted that Coinbase is at risk of bankruptcy. In fact, CEO Armstrong made it clear that Coinbase ‘has no risk of bankruptcy.’ Second, it is a ‘Risk Factors’ disclosure, which indicates there is risk that the custodial assets may be considered as property of bankruptcy estate, and it may be not.”

In any case, Lau adds, while such a situation has yet to be tested, when things go awry at a bank, uninsured depositors get paid before general creditors and stockholders do.

In fact, moving on from the 10Q issues, there is even a silver lining to the whole TerraUSD mess, which managed to push trading volumes up for Coinbase over recent days.

Such is the bearish sentiment, though, that Lau thinks there is an opportunity for those willing to seek it out right now.

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“The stock appears to trade at a distress level,” Lau summed up, “but the company’s fundamentals remain strong and long-term crypto adoption remains intact, providing an attractive entry point for long-term investors.”

Accordingly, Lau rates COIN shares an Outperform (i.e. Buy) while his $197 price target implies shares will rise ~219% over the coming months. (To watch Lau’s track record, click here)

Where do other analysts stand on COIN? 14 Buys, 4 Holds and 2 Sells have been issued in the last three months. Therefore, the stock gets a Moderate Buy consensus rating. Given the $177.39 average price target, shares could surge ~187% in the next year. (See Coinbase stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.