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ETF, Stocks  | October 27, 2021

As the popularity of cryptocurrencies — especially Bitcoin and Ethereum — surges, Coinbase Global (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."

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 just 2% this year after falling sharply in recent months. Ethereum has more than doubled 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

Ahead of the company's debut, Coinbase issued estimates on April 6 for its first quarter ended March 31 and an outlook for the full year ending Dec. 31, 2021. The company expected verified users of 56 million with $223 billion assets on platform, representing an 11.3% crypto asset market share.

On May 12, Coinbase reported Q1 results that slightly missed estimates. The company showed total revenue of $1.801 billion on EPS of $3.05. Wall Street expected Coinbase to earn $3.07 a share on revenue of $1.81 billion. Earnings soared 2,350%, while sales spiked 845% vs. the year-ago period.

On Aug. 10, Coinbase reported its Q2 results, earning $6.42 a share on sales of $2.22 billion. The company warned that its trading volume will be lower in the third quarter than the second quarter.

COIN Stock Technical Analysis

COIN stock is trading about 30% off its post-IPO highs. Shares are extended past a double bottom's 280.71 buy point following an Oct. 15 breakout. The 5% buy area went up to 294.75. Meanwhile, the RS line is at new recent highs, indicating strong outperformance vs. the broad market.

According to the IBD Stock Checkup, Coinbase stock shows a strong 96 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 stock dropped 1.5% Tuesday. Ahead of the open, Citi started coverage on Coinbase with a buy rating and a 415 price target. Meanwhile, the price of Bitcoin traded around $62,900 Tuesday, according to Coindesk, rebounding from sharp weakness at the end of last week. Bitcoin hit record highs on Oct. 20.

For now, the stock is no longer a buy because it is out of buy range past the stock's new buy point. Wait for the stock to fall back into buy range or form a new base before purchasing shares.


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