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 reasons.
Coinbase’s active userbase and trading activity is significantly influenced by pricing and volatility of the cryptocurrency prices. The recent rally in Bitcoin, which is seen as the bellwether crypto, should help to get investors engaged in crypto trading once again, potentially driving Coinbase’s revenues. Coinbase’s stock hasn’t really tracked the recent surge in Bitcoin prices giving it some room to run. While the stock is up by about 8% over the last week, it still remains down by about 21% since it was listed publicly in April. We also continue to believe that Coinbase’s valuation is attractive. Considering its current market price of $258 per share, the stock is valued at just about 34x our projected 2021 earnings estimate, despite the fact that we expect sales to rise almost 4x this year. While investors are factoring some amount of cyclicality into Coinbase’s revenues, given the nature of crypto prices, which in turn impact the company’s trading revenues, we still think the stock remains a good value.
We value the stock at about $295 per share, which represents a potential upside of about 15%. See our analysis on Coinbase Valuation : Expensive Or Cheap? for more details on Coinbase’s valuation.
[6/25/2021] At $225, Coinbase Stock Is A Solid Bet On The Crypto Future
Coinbase, the largest U.S. cryptocurrency exchange, has seen its stock price decline by over 30% since its mid-April IPO, trading at just about $225 per share. There are two broad factors that drove the sell-off. Firstly, the price for bellwether cryptocurrency Bitcoin has declined from levels of around $62,000 in mid-April to just about $33,000 as of Wednesday, and this, in turn, is impacting sentiment around Coinbase stock. Secondly, Coinbase went public via a direct listing, that enables early investors to sell shares on the first day of trading without the typical IPO lockup period and this also likely put pressure on the stock. Now, does the recent correction present a good entry-point into Coinbase’s stock? We think it does.
Coinbase is the market leader in the cryptocurrency space, which has the potential to be one of the most disruptive technologies of our time. Coinbase has a wide variety of services to retail and institutional customers and has built a reputation for transparency, security, and compliance, and this could make the company the go-to platform as bitcoin and other cryptos continue to gain traction. Moreover, Coinbase isn’t just a futuristic “story” stock. Coinbase is already delivering profits, and they are big. Sales are projected to grow by over 4x to almost $6 billion in 2021, per our estimates, and net profits could approach a whopping $2 billion this year. Although investors should brace for some cyclicality going forward as crypto prices are subject to multi-year cycles (two to four years, per Coinbase), the company is looking to stabilize revenues, doubling down on areas such as providing blockchain infrastructure, via its recent purchase of Bison Trails. Overall, we think the stock looks attractive at current prices of about $225 per share, trading at just about 10x projected 2021 revenues. We value Coinbase at about $295 per share, about 30% ahead of the current market price. See our analysis on Coinbase Valuation : Expensive Or Cheap? for more details on Coinbase’s valuation and how it compares to other exchanges and payment players.
[5/24/2021] How Has Coinbase Fared In Previous Bitcoin Bear Markets?
Coinbase was a big beneficiary of the crypto boom, with revenues in Q1 rising over 9x year-over-year to about $1.8 billion, as users flocked to its platform to cash in on soaring cryptocurrency prices. However, cryptocurrencies now appear to be in a bear market. Prices for bellwether cryptocurrency Bitcoin have declined from levels of around $62,000 in mid-April, as Coinbase went public, to just about $35,000 as of Sunday. Although prices have stabilized a bit since they fell to as low as $32,000 last week, the recent sell-off is a reminder that the crypto market is subject to big boom and bust cycles. So how is this likely to impact Coinbase’s performance going forward?
Coinbase’s revenues are very sensitive to cryptocurrency pricing, as prices influence the number of monthly transacting users on its platform and the total value of transactions. As prices collapse, users will be less active, while transaction revenue will also decline. For perspective, over the last crypto bear market in 2018 through which Bitcoin prices plunged by over 80%, Coinbase’s MTUs fell by about 70% from 2.7 million in Q1 2018 to just 0.8 million in Q1 2019. …