Should You Buy Coinbase Stock Following Recent Sell Off?

Coinbase stock (NASDAQ: COIN) has declined by almost 26% over the last month trading at levels of around $264 per share, considerably underperforming the S&P 500 which declined about 3% over the same period. There are a couple of factors driving the weakness in the stock. Firstly, Coinbase’s Q3 results – which were reported in early November – missed expectations due to some weakness in the number of transacting users and trading volumes. Separately, investors have likely been reducing exposure to high-growth stocks, such as Coinbase, due to rising inflation and an increasingly hawkish stance by the Federal Reserve, which has indicated that it could consider speeding up the tapering of its large-scale bond-buying at its next meeting. The Fed’s stance appears to have also impacted cryptocurrency prices, with bellwether crypto bitcoin down by about 20% over the past month.

So is Coinbase stock a buy following the sizeable correction? The stock currently trades at just about 22x our projected 2021 earnings, which is not a particularly rich valuation for a highly profitable and futuristic stock with solid long-term earnings potential. For perspective, Coinbase’s net margins stood at an incredible 57% over the first three quarters of 2021. However, the cryptocurrency market is inherently cyclical, and the odds are that we could be approaching a market peak given the Fed’s stance on interest rates. This could hurt momentum for Coinbase in the near term. That said, the stock could still be worth a look for long-term investors. We value Coinbase at about $300 per share, marking a premium of about 13% over the current market price. See our analysis on Coinbase Valuation: Expensive or Cheap? for more details on Coinbase’s valuation. Also, check out our analysis on Coinbase Revenues: How Does COIN Make Money? for details on the company’s key revenue streams and how they have been trending.

[10/12/2021] What’s Happening With Coinbase Stock?

Coinbase stock (NASDAQ: COIN) has gained almost 11% over the last week (five trading days) considerably outperforming the S&P 500, which was up by just about 1% over the same period. The gains are likely driven by the recovery in Bitcoin prices in recent weeks. While the bellwether cryptocurrency saw a big sell-off through the summer, it has rallied by about 6% over the last week and about 24% over the last month, trading at levels of $57,000 as of Monday. Higher crypto prices typically bring more active users onto the Coinbase platform and drive trading volumes, helping Coinbase’s revenues. Coinbase previously guided that its monthly transacting user base could drop to between 5.5 million to 8 million for the full year, down from around 8.8 million in June 2021, and it’s possible that the recent increase in crypto prices could stem this decline to a certain extent.

So is the Coinbase stock a buy at current levels of around $256 per share? Coinbase currently trades at just about 21x projected 2021 earnings, which is a reasonable valuation for a futuristic stock with solid earnings potential. For perspective, Coinbase’s net margins stood at an incredible 65% over the first half of 2021. To be sure, investors are pricing in the inherent cyclicality of the crypto business to value Coinbase for the long term, but we still think the stock is worth a look. We value Coinbase at about $300 per share, marking a premium of about 17% over the current market price.

See our analysis on Coinbase Valuation: Expensive or Cheap? for more details on Coinbase’s valuation. Also, check out our analysis on Coinbase Revenues: How Does COIN Make Money? for details on the company’s key revenue streams and how they have been trending.

[9/30/2021] Down 30% Since IPO, Is Coinbase Stock Finally Worth A Look?

Coinbase stock declined by about 8% over the last week (five trading days) compared to the broader S&P 500 which fell about 1% over the same period. While the recent sell-off is driven by macro factors such as rising bond yields and weak U.S. consumer confidence data, and the Chinese central bank’s move to ban all cryptocurrency transactions in the country, Coinbase stock has actually been under pressure for some time now. In fact, the stock remains down by over 30% since it went public in mid-April 2021. The crypto market has faced some softness of late, with the price of bellwether cryptocurrency Bitcoin down about 35% from recent highs. Coinbase also guided that it expects business to trend lower over the second half of 2021, noting that its monthly transacting user base could drop to between 5.5 million to 8 million for the full year, down from around 8.8 million in June 2021.

So is the stock a buy at current levels of around $225 per share? Coinbase currently trades at just about 18x projected 2021 earnings, which is a reasonable valuation for a futuristic stock with solid earnings potential. Although the markets are obviously pricing in the inherent cyclicality of Coinbase’s business, we think the stock is still worth a look. Coinbase is a market leader in the cryptocurrency space, which has the potential to be among the most disruptive technologies of our time. The company has built a reputation for transparency, security, and compliance, and this could make it the go-to platform as Bitcoin and other cryptos continue to gain traction. Coinbase is also taking steps to reduce the volatility of its business to an extent, doubling down on areas such as providing blockchain infrastructure and increasing its exposure to institutional customers, who are more steady compared to retail traders. We value the stock at about $295 per share, representing a potential upside of about 30% from the current market price.

See our analysis on Coinbase Valuation: Expensive or Cheap? for more details on Coinbase’s valuation. Also check out our analysis on Coinbase Revenues: How Does COIN Make Money? for details on the company’s key revenue streams and how they have been trending.

[8/11/2021] Coinbase Sees Some Weakness Going Forward. Is The Stock Still A Buy?

Coinbase published a stronger than expected set of Q2 2021 results, as its monthly transacting users and trading volumes continued to rise, despite the declines in Bitcoin prices through the quarter. However, despite the earnings beat, Coinbase stock remained listless in after-hours trading, considering that the company’s outlook for Q3 and the rest of the year was weak.

Revenues expanded 27% sequentially to $2.2 billion, while adjusted EBITDA rose by about 3% to $1.15 billion. Overall trading volumes on the platform stood at $462 billion, up 38% sequentially. Notably, institutional customers were the biggest driver of growth, with institutional trading volumes rising from 47% sequentially to $215 billion. This is a very positive development, in our view, as revenue from institutions is likely to be a little more stable versus retail customers who are likely to scale back during bear markets.

Looking ahead, the company expects monthly active users and trading volume to be lower over Q3 compared with Q2, due to the decline in cryptocurrency prices earlier in the quarter. Business overall could also decline over the back half of this year. For perspective, while the company had roughly 8.8 million monthly transacting users at the end of June, it expects average MTUs for this year to come in at between 5.5 million to 8 million for the full year.

So, although a decline in business is looking likely for Coinbase in the next couple of quarters, we still think the stock remains slightly undervalued trading at levels of about $265 per share, or just under 12x our projected 2021 revenues for the company. Coinbase is a market leader in the cryptocurrency space, which has the potential to be one of the most disruptive technologies of our time. The company has built a reputation for transparency, security, and compliance, and this could make it the go-to platform as bitcoin and other cryptos continue to gain traction. We value the stock at about $295 per share, representing a potential upside of about 11% from the current market price. See our analysis on Coinbase Valuation : Expensive Or Cheap?

[8/9/2021] Buy Coinbase Stock As Bitcoin Surges 50% From Recent Lows?

Bitcoin prices have recovered considerably, rising by over 50% since July 20, to almost $45,000, approaching the highest levels in over two months. The rally is likely driven by short covering as well as indicators that the U.S. SEC is increasingly open to allowing Bitcoin exchange-traded funds, a development that could possibly help to take the crypto to a broader base of investors. We think that the current Bitcoin rally bodes well for Coinbase, the largest U.S. cryptocurrency exchange, for a couple of…