Market outlook ahead of Coinbase’s public debut

Toews Asset Management CEO & Portfolio Manager Phil Toews joins Yahoo Finance Live to break down the latest market action.

Video transcript

ZACK GUZMAN: But first, I want to start with the latest indication that we have on where shares in the crypto exchange Coinbase will begin trading. Right now, that pointing to $340 a pop. That would be close to a $90 billion valuation, Akiko. Not bad for a company that wasn't even around just 10 years ago, but still waiting to see where exactly we're going to be opening. But if it was at that price, that would be the largest direct listing the NASDAQ has seen thus far.

AKIKO FUJITA: Yeah, and that $340 a share closer to what we saw in the private auction sales in March. $375 a share is what they sold that back then. A lot of people questioning the valuation, to your point. But there's a few threads here to watch. No question this is a milestone for the space. You've got a big direct listing, more and more institutional investors moving in.

And as we've talked about, Zack, you could argue the timing is perfectly set up for Coinbase to have this big debut when you think about the big moves we have seen in the cryptocurrency space. Bitcoin and Ethereum right on cue hitting another record in this session. It is Bitcoin alone, price there doubling since the start of the year. And so, the question, I think, moving forward, we're going to get into it with our analysts today, but is, number one, is that valuation justified? And then number two, really, how much of this significant revenue growth they have seen over the last year is going to be sustainable?

ZACK GUZMAN: Yeah, and that's the big question, is kind of the risks associated with it. Where we're going to see things open on day one is obviously important when it comes to anchoring a stock price, of course, as we've seen with any IPO. But to your point, we're going to be speaking to a lot of people out there with expertise in the crypto space. We already spoke with Blockchain.com CEO a little bit earlier last month, or maybe the beginning of April. He's going to be joining us to break down where we're at in this space.

Adoption cycle is important, whether or not Coinbase is going to be able to maintain its lead, as well as an analyst at MoffettNathanson who has a price target of $600 a share. Could seem rather large. Could be lofty there, Akiko, but it all depends on where we're going to start trading, which we'll get pretty soon here. We'll keep you updated with all the moves there. But of course, not just crypto here that we're focused on with today's show because it also kicks off earnings season, as we got those updates here earlier from some of the big banks out there.

And incredible beats, really, when you think about where expectations were on the banking front and the records put up here by some of the banks that we're going to be discussing today, including JPMorgan Chase, as well as Goldman Sachs, both showing strength there. Even Wells Fargo, as I said, getting into the mix here. But I want to start with kind of what we're seeing here as we sit at record highs and bring on our first guest to discuss what we got from the banks, as well as where we're going to go from here.

So let's bring on Phil Toews, Toews Asset Management CEO and portfolio manager joins us now. And Phil, obviously, this is kind of the biggest question we're going to be facing over the next couple of weeks here, right, is expectations versus what these companies deliver. And when you dig into kind of the results here from the banks, rather impressive what they were able to post. What's your reaction to that and kind of the setting we have moving deeper into earnings season?

PHIL TOEWS: Well, I think people had positive expectations for earnings coming into this-- the results from this last quarter. And I think it's going to deliver. I think we're going to see decent earnings. I think the thing that we focus on more than just specific earnings, are we meeting or are we exceeding for this quarter is really the baseline evaluations. I think that's more important to look at than any particular results.

And as a baseline, we're close to 24 times projected earnings on the S&P 500, which puts us in pretty much record territory or near that. So we think longer term, there are challenges. But look at how momentum is just playing out. We've got gains again today pretty much across the board. And I wouldn't be surprised if we saw that for another month or three months or a year. And I think things like Coinbase and the launch and the excitement around that are just all part of this phenomenon of an inflated market.

AKIKO FUJITA: Yeah, I mean, we'll get into the numbers from the big banks in a few minutes or so later in the show. But I'm curious to get your take on this valuation that you just pointed to on Coinbase. I mean, we're talking potentially $100 billion. What does this say about the rest of the market, or is it specific to the cryptocurrency space?

PHIL TOEWS: Well, one thing is, doesn't it make you feel like you haven't been productive enough? Like, $100 billion. Like, what have I done today? But the reality is, you've got-- I think you've got two things with Coinbase. First is the Bitcoin, Ethereum phenomenon, which we are not believers in. I think that if you look at the potential for issues around money laundering with cryptocurrencies, valuations are just crazy. I just wrote a commentary last week, and I was comparing some things like Bitcoin and NFTs to tulip bulbs back in Holland. So that is not a reliable source of either storing assets or gains, in our opinion.

But Coinbase is fascinating because the ability to which the industry, the world is able to tokenize other categories, other things, will potentially determine Coinbase more than cryptocurrencies, although we all understand that cryptocurrencies is what's driving the revenue and what's driving everything in that IPO right now.

ZACK GUZMAN: Phil, Phil, Phil, you just made the tulip bubble analogy here, a cardinal sin in my ears, what I'm hearing. But I won't disagree on the NFT front. We've seen those kind of crazy. But when it comes to kind of the underlying technology here within crypto-- I don't know-- it's interesting. And we're obviously going be talking about this pretty much all day.

But when you look at kind of maybe how it stacks up against what we've seen in terms of valuation for the largest exchanges here on the stock side, I mean, you put that into context. Jared Blikre was just putting market caps for ICE, you know, the parent company of the exchange we're talking about here. $67 billion, CME, $74 billion, NASDAQ, $26 billion. I mean, you put that in perspective. It seems like crypto is going to have to grow quite a bit to justify what we're seeing here. And you just don't see that possible.

PHIL TOEWS: Yeah, so we continue to make the analogy between what's happening right now and what happened during the internet bubble burst. And that situation, which, you know, that you just gave me a great example of, where you're looking at something and you're scratching your head and going, like, can that really be? Is it possible that we're seeing that kind of valuation in something? And that's one of the clear indicators that you're in bubble territory, and maybe not just bubble territory, but extreme bubble territory. And by the way, is no one else talking tulips?

But yeah, so these things really don't make sense from a traditional perspective. And so you can ask the question, is there something happening in the economy or in finance that makes the old rules no longer valid? And the answer almost always ends up being no ultimately. But along the way, it can be a fantastic ride.

ZACK GUZMAN: All right, Phil Toews, Toews Asset Management CEO and portfolio manager, appreciate you taking the time. We're going be talking about the opportunity on that ride, of course, throughout the show.