What Happened?
Shares of cryptocurrency exchange Coinbase (NASDAQ:COIN) fell 7.3% in the afternoon session after B. Riley analyst initiated coverage on the stock with a neutral rating and a price target of $185 amid valuation concerns and regulatory uncertainty. The price target implied a potential 5% downside from where shares traded before the research was initiated. The analyst added "We expect COIN shares to remain range-bound until the election is decided and regulatory clarity is provided or until better idiosyncratic catalysts emerge that provide visibility into more consistent profit growth."
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What The Market Is Telling Us
Coinbase’s shares are extremely volatile and have had 77 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 22 days ago when the stock dropped 8.3% as the major indices declined (Nasdaq down 1.8%, S&P 500 down 0.9%) amid rising geopolitical tensions in the Middle East.
NBC News reported (citing White House and Defense Department officials) that the U.S. "has indications that Iran is preparing to imminently launch a ballistic missile attack against Israel."
Separately, Fed Chair Jerome Powell told investors there is no "preset course" regarding the pace of future rate cuts. He added in a speech delivered to the National Association for Business Economics, "Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance. But we are not on any preset course." While the markets could still be right about more rate cuts in the near term, Powell's comments added uncertainty to both the cadence and magnitude of cuts. Following these updates, the VIX index (or fear gauge) spiked as the reports created more uncertainty, which investors certainly don't like.
Coinbase is up 26% since the beginning of the year, but at $197.64 per share, it is still trading 29.3% below its 52-week high of $279.71 from March 2024. Investors who bought $1,000 worth of Coinbase’s shares at the IPO in April 2021 would now be looking at an investment worth $602.29.
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