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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?
"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 more than 70% so far this year. Ethereum has more than tripled 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 expects verified users of 56 million with $223 billion assets on platform, representing an 11.3% crypto asset market share.
Coinbase has yet to post results as a public company. The crypto giant turned profitable in 2020, earning $1.64 per share on revenue of $1.28 billion. Last quarter, EPS soared 743% year over year to 90 cents per share on sales of $585.1 million. Revenue surged 495% vs. the year-earlier period.
Looking at the current quarter, analysts expect the company to earn $2.97 per share, a whopping 1,756% increase. Meanwhile, sales are expected to skyrocket 849% to $1.81 billion.
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."
Is Coinbase Stock A Buy Right Now?
Coinbase stock tumbled to new lows Friday. Shares declined as much as 3.9% before paring losses to 0.6%.
Bitcoin briefly plunged below $48,000 Thursday night, trading as low as $47,467 before rebounding. The price of Bitcoin traded around $50,200 Saturday evening. On April 14, Bitcoin topped out at $64,829, according to Coindesk.
For now, the stock is not a buy because it has not formed a proper chart pattern, as it trades nearly 30% off its all-time high. Be on the lookout for a new base to offer a buy point.
