Coinbase Surges 71% Quarter to Date: Buy, Hold or Sell the Stock?

Shares of Coinbase Global Inc COIN have rallied 70.9% in quarter to date, outperforming its industry, sector and Zacks S&P 500 Composite’s return in the same time frame. COIN, America's largest registered crypto exchange, has a market capitalization of $76.3 billion. The average volume of shares traded in the last three months was 11.8 million.COIN shares are trading well above the 50-day moving average, indicating a bullish trend.COIN vs Industry, Sector & S&P 500 QTDImage Source: Zacks Investment ResearchMixed Analyst Sentiment for COINTwo analysts covering the stock have revised their estimates south for 2024, while five analysts raised the same for 2025 over the past 30 days. The consensus estimate for 2024 has moved 2.4% south but increased 24.8% in the past 30 days.Though the Zacks Consensus Estimate for 2024 earnings implies a 1301% year-over-year increase, the same for 2025 suggests a 48% decrease.Image Source: Zacks Investment ResearchFactors Favoring COIN StockCOIN provides financial infrastructure and technology for the crypto economy in the United States and internationally. The company is set to benefit from higher crypto asset volatility and crypto asset prices. Increasing regulatory clarity acts as a catalyst for Coinbase and the broader crypto economy. Strengthening banking connections, new licenses and the expansion of tailor-made product ranges to meet unique customer preferences are helping COIN reach new heights. Coinbase stays focused on growth by increasing its market share in the U.S. spot and derivatives markets, expanding its product portfolio and the international market. This apart, growth in stablecoins should also fuel the company’s top line.  COIN has been prioritizing crypto utility. It envisions bringing 1 billion or more people on crypto rail and is thus heavily investing in infrastructure and foundational platforms like Layer 2s, Base and Stablecoins. COIN partnered with Stripe to enhance the global adoption of crypto. Focus on shifting to a subscription-based model enabled COIN to maintain positive EBITDA for the last six consecutive quarters. Its liquidity supports strategic investment in growth initiatives and expands its service offerings.Unfavorable Return on EquityCOIN’s return on equity in the trailing 12 months was 14.8%, lower than the industry average of 30.8%, reflecting inefficiency in utilizing shareholders’ funds. Image Source: Zacks Investment ResearchThe return on invested capital in the trailing 12 months was 7.6%, compared unfavorably with the industry average of 21.2%. This reflects the insurer’s inefficiency in utilizing funds to generate income.Image Source: Zacks Investment ResearchAverage Target Price for COIN Suggests a DownsideBased on short-term price targets offered by 21 analysts, the Zacks average price target is at $257.38 per share. The average suggests a potential 15.5% downside from Friday’s closing price.Image Source: Zacks Investment ResearchExpensive ValuationCoinbase shares are trading at a premium to the Zacks Financial Transaction Service Market. Its 12-month forward price-to-earnings of 102.68X is much higher than the industry average of 25.47X, the broader sector’s 25.64X and the Zacks S&P 500 Composite’s 22.38X.Its Value Score of F suggests that the stock is not so cheap and indicates a stretched valuation at this moment. Image Source: Zacks Investment ResearchShares of Robinhood Markets HOOD and Interactive Brokers Group, Inc. IBKR, two other crypto-oriented stocks, are also trading at a multiple higher than the industry average.To ConcludeThe inherent volatility in crypto prices exposes COIN to operational risks. The failure of its foundational platforms also poses risks. Coinbase, the custodian of client assets, is also exposed to cyber threats.Nonetheless, the company’s efforts to accelerate growth in the crypto market, increase market share in spot trading on consumer and institutional trading platforms and improve trading experience, along with continued innovation, should help it accelerate growth. Yet, a premium valuation, negative analyst sentiment, and weak return on capital keep us cautious. Investors who own this Zacks Rank #3 (Hold) stock should retain it, while others may wait for a better entry point. 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(IBKR): Free Stock Analysis Report Coinbase Global, Inc. (COIN): Free Stock Analysis Report Robinhood Markets, Inc. (HOOD): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks