Coinbase stock (COIN) price has nearly doubled since its June lows with a potential for much more upside this year, according to a mix of technical and fundamental indicators.
COIN’s symmetrical triangle reversal
COIN has been undergoing a strong bullish reversal after falling by almost 90% from its record high of $368.90 in November 2021.
Coinbase stock price was up over 95% to $75.27 as of July 20’s close when measured from its May 12 local bottom of $40.83. Its recovery led to a symmetrical triangle pattern formation with the price forming a sequence of lower highs and higher lows.
Symmetrical triangles in downtrend typically turn out to be bearish continuation patterns. They resolve after the price breaks below their lower trendlines to fall further. But in rare instances, a symmetrical triangle could form at the end of a downtrend, leading to sharp bullish reversals.
As it seems, COIN has already entered the breakout stage of its symmetrical triangle reversal pattern. Notably, Coinbase stock closed above the structure’s upper trendline on July 28 while accompanying a rise in trading volume, as shown below.
COIN daily price chart featuring symmetrical triangle reversal setup. Source: TradingView
COIN now tests $80 as its interim resistance while eyeing a further upside toward $135. The profit target is measured after calculating the maximum distance between the symmetrical triangle’s upper and lower trendline and adding the outcome to the breakout point.
The triangle’s upside target appears closer to COIN’s 200-day exponential moving average (200-day EMA; the blue wave in the chart above) near $153. That psychologically raises the possibility of COIN forming bullish wicks toward $153 if it reaches $135 this year.
That would mean a 102% rally from today’s price.
Coinbase valuation: Q1 earnings
Coinbase Q1 earnings were underwhelming due to weaker-than-expected revenue and a substantial drop in monthly transacting users.
The firm has not disclosed any cost management plans in the said earnings call, but a report published by the Financial Times this June shows that it would cut nearly a fifth of its workforce. Also, Coinbase ended its popular affiliation program in July, according to Business Insider.
“Our target price of [COIN] is around $52 [in 2022],” noted Rumak Research, a group of financial analysts, in their recent Coinbase assessment. The given analysis was based on reactions to past market cycles, coupled with their capital asset pricing model (CAPM), as shown below.
Coinbase valuation based on CAPM model. Source: Rumak Research/Seeking Alpha
The stock’s target price comes to be near $160, according to Rumak Research, when considering the current average market risk premium in the United States of 5.6%.
On similar lines, D.A. Davidson analyst Christopher Brendler noted that Coinbase would survive the crypto bear market despite its “financial situation,” including $3.4 billion in long-term debt. Nevertheless, the company is still sitting on $6.1 billion.
“The fact that they have to scale back a little bit, it may not be the best news, but ultimately, I know that they’re not going to be in a situation where they’re struggling to survive,” Brendler told Forbes, adding:
“They have been through it before and I’m confident they’ll be able to get through it again.”
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