The recent rally in Bitcoin (BTCUSD) prices has propelled shares of crypto stocks much higher, as well. In the last year, BTC prices have almost tripled, valuing the digital asset at $1.3 trillion by market cap.
Since the start of 2023, Bitcoin prices have been driven higher by several factors, including slower inflation, geopolitical tensions, the possibility of multiple Fed rate cuts, the collapse of several regional banks, the launch of spot BTC exchange-traded funds (ETFs), and the upcoming halving event.
However, against an uncertain macro backdrop, it's worth pointing out that many crypto-related stocks are now technically overbought, and trading well above Wall Street's mean price targets. Here are two overvalued stocks at risk of moving lower, especially if Bitcoin prices come under pressure.
1. Coinbase Global Stock
Valued at $49.8 billion by market cap, Coinbase Global (COIN) is among the largest crypto exchanges in the world. In the last 12 months, COIN stock has surged 218%, easily outpacing the broader markets.
The performance of Coinbase stock is closely tied to the price action in Bitcoin and other related cryptocurrencies. Coinbase earns a majority of revenue from commission and fees from trading volumes. Typically, trading volumes increase during bull markets, and nosedive when sentiment turns more bearish.
Due to higher BTC prices, Coinbase reported exchange revenue of $529.3 million in Q4 of 2023, an increase of 64.3% year over year. As trading activity picks up in 2024, expect these numbers to move higher in the next few quarters.
Coinbase continues to expand its portfolio of products and services. In addition to trading fees, Coinbase earns revenue from custody fees, as well as interest earned on cryptocurrencies, including stablecoins. In Q4, Coinbase reported $171.6 million in stablecoin revenue, mostly from USDC, which is the seventh largest cryptocurrency in the world.
Similar to other growth stocks, Coinbase has focused on lowering its cost base to improve profit margins. Its operating expenses in the last four quarters have fallen to $2.77 billion from almost $5 billion in 2022.
Out of the 21 analysts covering Coinbase stock, eight recommend “strong buy,” one recommends “moderate buy,” seven recommend “hold,” one recommends “moderate sell,” and four recommend “strong sell,” for a consensus rating of “hold.” The average target price for COIN stock is $159.11, a discount of 22.7% to the stock's current trading price.
2. Marathon Digital Holdings Stock
Valued at $6 billion by market cap, Marathon Digital Holdings (MARA) stock is up 314% in the last year. Marathon Digital is a Bitcoin mining company that mined 12,852 BTC last year, up from 4,144 BTC in 2022. It also increased its mining capacity to 26.4 EH/s (exahashes per second), which is among the highest in the industry.
Right now, Marathon spends $22,000 to mine one BTC. The company beat Q4 revenue estimates at $156.8 million, although the adjusted per-share loss of $0.02 fell short of expectations. Moreover, Marathon Digital reported an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $260.4 million in Q4, compared to a loss of $374 million in the year-ago period.
Marathon Digital reduced net balance sheet debt by 56% to $331 million in fiscal year 2023, down from $798 million in 2022. It ended the year with close to $1 billion in total liquidity which can be used to expand operations, lower debt and target accretive acquisitions.
Out of the nine analysts covering MARA stock, three recommend “strong buy,” five recommend “hold,” and one recommends “strong sell,” for a consensus rating of “moderate buy.” The average target price for MARA stock is $19.10, more than 29% below the current trading price.
