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Here's Why Hold Strategy is Apt for Coinbase Global (COIN)
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Coinbase Global, Inc. (COIN - Free Report) has been in investors’ good books on the back of higher subscription and services revenues, adjusted EBITDA, improved product suite and declining expenses.
Zacks Rank & Price Performance
Coinbase Global currently carries a Zacks Rank #3 (Hold). In the past six months, the stock has lost 58.1% against the industry’s growth of 4.9%.
Image Source: Zacks Investment Research
Key Drivers
Coinbase Global is likely to gain from increased adoption of a greater number of crypto assets, higher volatility and a rise in interest across the entire crypto economy.
Transaction revenue, a major component of COIN’s total revenues, is expected to increase due to enhanced consumer trading volumes. Higher interest income, growing blockchain rewards and increased custodial fees for Coinbase are likely to drive subscription and service revenues.
The company is successfully delivering on its promises by bringing down operating expenses and achieving efficiency to do more with less. Total expenses plunged 48% year over year in the first quarter. COIN expects transaction expenses to be in the low to mid-teens as a percentage of net revenues for the second quarter of 2023.
COIN believes revenue diversification is a means to grow in the long term so that one macro event does not affect all revenue streams. It launched International Exchange to venture into derivatives markets and is also expanding to new markets, like Canada, Brazil and Singapore. The company is also expecting to grow its subscription and service revenues through the acquisition of One River Asset Management, helping it venture into the asset management business.
The company is also implementing the second phase of crypto adoption, that is, crypto as a technology. The company is making continued investments in technology through products like staking which are expected to increase customer engagement.
Improved transactional revenues coupled with subscription and service segments’ revenues are likely to drive the top line of COIN. An increase in both the average crypto asset prices and total crypto spot market volumes should drive the overall trading volume of COIN.
Key Concerns
There are a few factors that have been impeding the stock’s growth lately.
The company’s performance is dependent on market volatility and asset prices. The collapse of a cryptocurrency exchange like FTX in 2022, which wiped off 64% of total market capitalization, could lead to a volatile top line in the future. Hence, the company should try to enhance its product suite, diversify its revenue streams and keep operating expenses low. We believe that a systematic and strategic plan of action will drive growth in the long term.
Assurant’s bottom line outpaced estimates in three of the trailing four quarters and missed once. The average earnings surprise is 18.2%.
The Zacks Consensus Estimate for AIZ’s 2023 earnings indicates a 22.1% rise, while the same for revenues suggests 2.7% growth from the prior-year reported figures.
The bottom line of Enact Holdings outpaced the Zacks Consensus Estimate in three of the last four quarters and missed once, the average surprise being 28.6%.
The consensus mark for ACT’s 2023 earnings has moved 8.9% north in the past 60 days.
Old Republic’s bottom line outpaced estimates in each of the trailing four quarters. The average earnings surprise is 29.9%.
The consensus mark for ORI’s 2023 earnings has moved 9.1% north in the past 60 days.
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Here's Why Hold Strategy is Apt for Coinbase Global (COIN)
Coinbase Global, Inc. (COIN - Free Report) has been in investors’ good books on the back of higher subscription and services revenues, adjusted EBITDA, improved product suite and declining expenses.
Zacks Rank & Price Performance
Coinbase Global currently carries a Zacks Rank #3 (Hold). In the past six months, the stock has lost 58.1% against the industry’s growth of 4.9%.
Image Source: Zacks Investment Research
Key Drivers
Coinbase Global is likely to gain from increased adoption of a greater number of crypto assets, higher volatility and a rise in interest across the entire crypto economy.
Transaction revenue, a major component of COIN’s total revenues, is expected to increase due to enhanced consumer trading volumes. Higher interest income, growing blockchain rewards and increased custodial fees for Coinbase are likely to drive subscription and service revenues.
The company is successfully delivering on its promises by bringing down operating expenses and achieving efficiency to do more with less. Total expenses plunged 48% year over year in the first quarter. COIN expects transaction expenses to be in the low to mid-teens as a percentage of net revenues for the second quarter of 2023.
COIN believes revenue diversification is a means to grow in the long term so that one macro event does not affect all revenue streams. It launched International Exchange to venture into derivatives markets and is also expanding to new markets, like Canada, Brazil and Singapore. The company is also expecting to grow its subscription and service revenues through the acquisition of One River Asset Management, helping it venture into the asset management business.
The company is also implementing the second phase of crypto adoption, that is, crypto as a technology. The company is making continued investments in technology through products like staking which are expected to increase customer engagement.
Improved transactional revenues coupled with subscription and service segments’ revenues are likely to drive the top line of COIN. An increase in both the average crypto asset prices and total crypto spot market volumes should drive the overall trading volume of COIN.
Key Concerns
There are a few factors that have been impeding the stock’s growth lately.
The company’s performance is dependent on market volatility and asset prices. The collapse of a cryptocurrency exchange like FTX in 2022, which wiped off 64% of total market capitalization, could lead to a volatile top line in the future. Hence, the company should try to enhance its product suite, diversify its revenue streams and keep operating expenses low. We believe that a systematic and strategic plan of action will drive growth in the long term.
Stocks to Consider
Some better-ranked stocks from the broader Finance space are Assurant, Inc. (AIZ - Free Report) , Enact Holdings, Inc. (ACT - Free Report) and Old Republic International Corporation (ORI - Free Report) . Each of these companies currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Assurant’s bottom line outpaced estimates in three of the trailing four quarters and missed once. The average earnings surprise is 18.2%.
The Zacks Consensus Estimate for AIZ’s 2023 earnings indicates a 22.1% rise, while the same for revenues suggests 2.7% growth from the prior-year reported figures.
The bottom line of Enact Holdings outpaced the Zacks Consensus Estimate in three of the last four quarters and missed once, the average surprise being 28.6%.
The consensus mark for ACT’s 2023 earnings has moved 8.9% north in the past 60 days.
Old Republic’s bottom line outpaced estimates in each of the trailing four quarters. The average earnings surprise is 29.9%.
The consensus mark for ORI’s 2023 earnings has moved 9.1% north in the past 60 days.