As the popularity of cryptocurrencies — especially Bitcoin and Ethereum — surges, Coinbase (COIN) is at the forefront of the cryptocurrency industry. After the company’s hyped IPO, is Coinbase stock a buy or sell in the current stock market rally?
Coinbase Stock IPO
The crypto giant launched its direct listing on the Nasdaq on April 14, pricing at 250 a share. Coinbase stock shot up nearly 72% to 429.54 before closing its first day of trading at 328.28, up 31.3%, for a valuation of $87.3 billion.
Analysts expect the Coinbase IPO to give the cryptocurrency market increased validation.
“The Coinbase IPO is potentially a watershed event for the crypto industry and will be something the Street will be laser-focused on to gauge investor appetite,” Wedbush analyst Dan Ives wrote in a note to clients. “Coinbase is a foundational piece of the crypto ecosystem and is a barometer for the growing mainstream adoption of Bitcoin and crypto for the coming years.”
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How Does Coinbase Make Money?
Coinbase is the largest U.S. cryptocurrency exchange. It lists about 50 cryptocurrencies for trading, led by Bitcoin and Ethereum. Bitcoin is the largest digital coin by market value and is up more than 75% this year. Ethereum has surged nearly 500% in 2021, according to Coindesk.
Coinbase charges fees of several percentage points to deposit funds and trade, which is one of the main ways the company makes money. Roughly 90% of the company’s revenue, as of 2020, came from transaction fees from trading and services like storage.
Coinbase Stock Fundamental Analysis: Huge Earnings And Sales Growth
The cryptocurrency exchange reported third-quarter results Nov. 9 that missed expectations, despite a pickup in crypto prices and trading activity that has extended into the current quarter. Coinbase earned $1.62 per share. That was below FactSet estimates for $1.82. The company reported revenue of $1.235 billion. That missed views for $1.614 billion.
Earnings soared 295% year over over year, while revenue surged 316% vs. the year-ago period.
Monthly transacting users dipped from the prior quarter to 7.4 million. Trading volume also shrank over that period.
COIN Stock Technical Analysis
COIN stock is trading about 40% off its post-IPO highs. In early December, shares gave up the entirety of a big gain past a double bottom’s 280.71 buy point following an Oct. 15 breakout, triggering the key round-trip sell rule. COIN shares are sharply below their 50-day benchmark.
According to the IBD Stock Checkup, Coinbase stock shows an improving 81 out of a perfect 99 IBD Composite Rating. The Composite Rating helps investors easily measure a stock’s fundamental and technical metrics.
Coinbase Stock News
On April 22, Mizuho analyst Dan Dolev initiated coverage on the stock with a neutral rating and a 285 price target. “Over time, Coinbase pricing — and industry pricing in general — may face downward pressure from platforms like PayPal and Cash App,” Dolev commented. “This is because PayPal and Cash App primarily use their crypto trading products as engagement tools, whereas Coinbase relies on its crypto trading products as its main source of revenue and profitability.”
On May 24, Goldman Sachs initiated coverage with a buy rating and a 306 price target. Goldman analyst Will Nance said in a note to clients that Coinbase is the best way to gain exposure to cryptocurrency ecosystems.
On May 25, JPMorgan initiated coverage on Coinbase with an overweight rating and a 371 price target. In response, Coinbase stock surged 7.6%.
On June 16, Canaccord Genuity started the stock with a buy rating and a 285 price target.
On Sept. 7, Coinbase disclosed it received a Wells notice from the SEC last week. The regulator says it intends to sue the company over the company’s Coinbase Lend program.
On Sept. 24, China’s central bank cracked down on cryptocurrencies, saying all cryptocurrency transactions are illegal. “Financial institutions and non-bank payment institutions cannot offer services to activities and operations related to virtual currencies,” The People’s Bank of China said on its website.
On Oct. 12, the company announced Coinbase NFT, a peer-to-peer marketplace that lets users mint, collect and trade NFTs, or non-fungible tokens.
On Oct. 19, Coinbase said Facebook had chosen Coinbase as its custody partner for its pilot of Novi, a new digital wallet that enables people to send and receive money abroad instantly, securely, and with no fees.
Is Coinbase Stock A Buy Right Now?
Coinbase slid over 6% Tuesday. The price of Bitcoin dropped to $47,400 Tuesday, according to Coindesk, falling more than 8% over the last 24 hours. Bitcoin hit a record high on Nov. 10 at $68,990.
For now, the stock is no longer a buy after its sharp losses in recent weeks. Wait for the stock to form a new base before purchasing shares.
For more leading stocks and stocks approaching buy points, check out these IBD Stock Lists, like the Stocks Near Buy Zones. To see the current stock market trend, check out IBD’s signature daily analysis, The Big Picture.
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