Coinbase Global, Inc. (COIN), which is a San Francisco-based concern, provides financial infrastructure and technology for the crypto sector. The company made its stock market debut on April 14, 2021, at a nearly $100 billion valuation. On the first day of trading, its shares soared in price to hit their 52-week high of $429.54, due partly to investor optimism because Cathie Wood bought approximately $245.90 million of its shares.
The stock has gained 24.4% in price over the past month to close Friday’s trading session at $300.84. However, it is currently trading 30% below its 52-week high.
This month, COIN became the custody partner of Facebook, Inc.’s (FB) new digital wallet, Novi. It also announced Coinbase NFT on October 12, a peer-to-peer marketplace that is expected to make minting, purchasing, showcasing, and discovering NFTs easier than ever. In addition, bitcoin’s sky-high prices have helped COIN gain. However, the company’s director, Frederick Ernest Ehrsam III, sold 87,649 shares. In addition, this month, Cathie Wood’s Ark Invest completed the sale of 98,427 shares of COIN. Investigations into the company are also ongoing on alleged violations of securities laws. So, its near-term prospects look uncertain.
Here’s what could influence COIN’s performance in the coming months:
COIN’s total revenue came in at $2.23 billion for the second quarter ended June 30, 2021, compared to $186.38 million in the year-ago period. The company’s monthly transacting users (MTU) increased 486.7% year-over-year to 8.80 million. Its trading volume increased 1,550% year-over-year from the same period last year to $462 billion. While its net income was $1.61 billion, up 4,918.8% year-over-year, its adjusted EBITDA increased 1,785.2% year-over-year to $1.15 billion.
Several law firms have launched an investigation into COIN on alleged violations of federal securities laws under the Securities Exchange Act of 1933. It is alleged that the company made false or misleading statements or excluded at the time of offering that it required a sizable cash injection and that its platform was susceptible to service-level disruptions. So, this action has the potential to harm the company.
In terms of forward non-GAAP P/E, COIN’s 23.09x is 96.7% higher than the 11.74x industry average. Likewise, the stock’s 8.50x and 17.35x respective EV/S and EV/EBITDA are higher than the 3.27x and 12.50x industry averages. Moreover, its P/S of 8.85x is 154.9% higher than the 3.47x industry average.
POWR Ratings Don’t Indicate Enough Upside
COIN has an overall C rating, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. COIN has a B grade for Quality, which is in sync with its 100% trailing-12-month gross profit margin, which is higher than the 63.72% industry average.
However, the stock has a D grade for Value, which is consistent with its higher-than-industry valuation ratios. In addition, COIN has an F grade for Stability.
COIN is ranked #48 out of 160 stocks in the Software – Application industry. In addition to the POWR Rating grades I’ve just highlighted, we’ve also rated the stock for Growth, Sentiment, and Momentum. Get all the COIN ratings here.
COIN reported impressive second-quarter financials. However, analysts expect its revenue and EPS to decline 8.6% and 50.3%, respectively, year-over-year to $6.47 billion and $6.32 in its fiscal year 2022. So, the stock looks significantly overvalued at its current price level, and we think it could be wise to wait for a pullback before adding the stock to one’s portfolio.
How Does Coinbase (COIN) Stack Up Against its Peers?
While COIN has an overall POWR Rating of C, one might want to consider investing in Software-Application stocks with an A (Strong Buy) rating, such as Commvault Systems, Inc. (CVLT), Open Text Corporation (OTEX), and National Instruments Corporation (NATI).
COIN shares were trading at $311.78 per share on Monday morning, up $10.94 (+3.64%). Year-to-date, COIN has declined -5.03%, versus a 22.54% rise in the benchmark S&P 500 index during the same period.